Many people think the recent U.S. economic and housing crisis was a stand-alone event that had little or no impact on the Canadian market. That's simply not true. It played a big part then, continues to do so now and will likely do so in the future.
When spending, manufacturing and hiring slowed to a crawl south of the border, so did the rate of inflation. One of the primary differences between our two countries was that Canada continued to build and grow through the recession and recovered fairly quickly, whereas the U.S. did not.
However, inflation remained similarly low in both nations. Canada's inflation rate is expected to hover around two per cent for a couple more years. Price-sensitive buyers for all consumer goods are happy with the stability but concerned about the lack of immediate return their investments.
The collapse of the U.S. housing market from 2006 to 2011 was unparalleled. It's just now beginning to rebound, and we will feel the effects of this recovery in Canada. It's just been in the past year that new-home starts began to surpass the rate of completion.
When nothing was happening south of the border, suppliers looked to Canada to purchase building materials, and the prices were good. Now that the U.S. housing recovery is underway, suppliers will not be fooled into extending unlimited credit again and will increase prices rather than risk long-term commitments.
There are many examples of commodities being affected by this shift.
Even though supply may have increased, prices have also increased. When building-material demand increases in the U.S., there's a concern about the availability of supply in Canada from the larger American suppliers. This has a tremendous impact on the renovation sector, a huge segment of the Manitoba economy.
The most comforting observation is new-home prices in Canada have not moved out of line with disposable income. Although the resale market has had some dramatic ups and downs across the country, the new-home market has trended steadily upwards. Only Vancouver and Victoria have gone against this trend, with declining prices.
It will be fascinating to watch the recovery and growth of the U.S. market over the next decade, all the while being aware of the impact it is sure to have on us.
Mike Moore is president of the Manitoba Home Builders' Association.