Is the Canadian Housing Market in for a Shock?

"[T]housands of people getting buried in the rubble of Vancouver's collapsing [housing] prices. A dream market has turned into a nightmare, faster than anyone thought possible. [T]he boom is shifting into reverse, and economists are warily backing away from their sunny predictions, and grappling with a question no one has posed for 20 years: how bad is it going to get? It's becoming increasingly likely that the answer to that question will be 'even worse than you imagined.'

[D]espite the carnage in Vancouver, many economists and real estate groups are still predicting that we'll have just a little stumble-maybe a drop of three to eight per cent in prices-and then the market will roar back to life by the end of the year. But new data on the plunging housing market suggests that those relatively upbeat assessments are wrong, and Canada could see a 20 per cent drop in average house prices between now and late 2011. If sophisticated investors are correct, it might be close to a decade before we once again see prices as high as they were last summer.

[If housing] prices are about to embark upon a long, slow decline followed by an anemic recovery, what will that mean for Canada? On the positive side, it will mean thousands of families who can't currently afford houses may gradually see them fall within reach. But the negative fallout will be painful, long-lasting and will touch us all. It will mean a huge drop in the wealth of millions of Canadians, as their biggest investment slowly sinks in value. It will mean consumers clamping down on their spending because they feel poorer, contributing to the general economic decline."