Are we headed for a U.S. type housing meltdown? No, and here's why.

Canada's housing market is returning to more balanced conditions after six consecutive years of unprecedented strength. Although conditions are softening here - rapidly in certain areas - there are many factors that point to Canada's housing market avoiding a U.S.-style crash even as the Canadian economy slips into recession:

Though weakening, sales continue to run above the average for the last 20 years and there are no significant supply excesses domestically
Across the country, downward movement of house prices are only 3% year-over-year in the third quarter (compared with a 5 to 15% decline in the U.S.)
International studies conducted by agencies such as the International Monetary Fund have found that Canada is still considered to be one of the countries where the housing market is least overvalued
Canada's housing market is also much less vulnerable given the very limited sub-prime mortgage activity (5% of outstanding mortgages compared to approximately 14% in the U.S.)
The speculative sector is relatively small
Housing affordability - which had deteriorated over the past two years - will improve with the recent significant rate cuts by the Bank of Canada and softer house prices.

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