The 12-month change in the Teranet-National Bank House Price Index has decelerated in recent months to 3.4%, led by declines in Vancouver (-1.4%) and Victoria (-1.7%). Some people interpret this weakness as a sign that a housing crash has started – see, for example, the Canadian Business article “Canada’s housing crash begins.” I don’t see a collapse in 2013 for several reasons. One is the highly supportive monetary environment.

In the case of the US housing boom from 2003 to 2007, the overvaluation was pricked after the Federal Reserve dramatically tightened monetary policy to cool off an overheated economy. This catalyst is absent in Canada as 2013 commences.

Indeed, monetary policies in Canada, the US, Japan, China and elsewhere around the world are dialled to the opposite extreme. They are hyper-expansionary, with interest rates at record lows and printing presses running like never before.

This means that Canada and other countries should continue generating growth in jobs and income. Since higher employment and income typically support housing markets, prices are not likely to fall much in 2013. Or if they do, they shouldn’t stay down for long.

Click here for the full Globe and Mail article.

US Congress’ excruciating, extraordinary New Year’s Day approval of a compromise averting a prolonged tumble off the fiscal cliff hands President Barack Obama most of the tax boosts on the rich that he campaigned on. It also prevents House Republicans from facing blame for blocking tax cuts for most American households, though most GOP lawmakers parted ways with Speaker John Boehner and opposed the measure.

Passage also lays the groundwork for future battles between the two sides over federal spending and debt.

Capping a holiday season political spectacle that featured enough high and low notes for a Broadway musical, the GOP-run House voted final approval for the measure by 257-167 late Tuesday. That came after the Democratic-led Senate used a wee-hours 89-8 roll call to assent to the bill, belying the partisan brinkmanship that coloured much of the path to the final deal.

“A central promise of my campaign for president was to change the tax code that was too skewed towards the wealthy at the expense of working middle-class Americans,” Obama said at the White House before flying to Hawaii to resume his holiday break. “Tonight we’ve done that.”

Click here for more from the Globe and Mail.

Canada welcomed Washington’s last-minute deal on the fiscal cliff today, but warned that significant risks remained and urged more action to put the US fiscal situation on a sustainable path.

“Canada welcomes the agreement reached between the (US President Barack Obama) and the Congress that protects the US economy in the short term,” Finance Minister Jim Flaherty said in a statement.

“That said, there remain a number of significant risks to the US economic outlook. It is my hope that leaders in the United States continue to work together to develop future action that will put the US fiscal position on a sustainable path,” he said.

Click here for full details in the Financial Post.

You’ve probably missed the bottom of the US housing market, but the question for Canadians is whether it’s too late to jump in now.

Maybe it’s the strength of the loonie, the increasing value of their principal residences or the lure of still deeply discounted housing, but Canadians love the United States – especially the Sun Belt – where we remain the #1 foreign buyer of property.

Prices won’t likely go lower, says Beata Caranci, Deputy Chief Economist at TD Canada Trust. But, based on the 5% year-over-year growth that the United States has seen in average property values, they’re not returning to 2006 levels anytime soon either.

“If you were trying to get in at the very bottom, you missed it,” Caranci says. “You are still pretty darn close to skimming the bottom, and the more you wait, you can expect about 5% price growth every year.”

Click here to read the Financial Post article.

Canadians appear less concerned about retirement planning than in years past as they continue to focus on debt reduction as their main financial priority, according to a new study released today by CIBC.

Overall, the poll done for the bank by Harris/Decima showed 17% of respondents selected debt reduction as their main priority in 2013, unchanged from 2012 and the third year in a row that it has topped the list. Fourteen per cent chose debt reduction in 2011.

But while paying down debt topped the list, it remains to be seen how much progress Canadians will make in accomplishing that goal.

Despite having the same priority last year, Statistics Canada says the household debt to income ratio actually rose to a record high 164.6% in 2012.

Click here to read more in the Globe and Mail.

Click here for the CIBC press release.