Quote:Moreover, credible analysts don’t see a U.S.-style crash. Professor Robert Shiller told CBC News in September that Canada should be spared because its banks have low subprime exposure.

Quote:Now, both Shiller and Drummond are quick to say Canadians are not likely to experience the near-total meltdown Americans experienced.

For one thing, Canadian banks never joined in the subprime-lending lunacy that inflated the American bubble to such extremes.

For another, Canadian mortgages are insured by the federal government through Canadian Mortgage and Housing Corp.

But Shiller says Canadians do seem to be suffering from the same delusion that afflicted Americans: the notion that housing prices always rise.

He has studied data going back a century, and says that when you factor in inflation, and depreciation of the home's physical structure, "historically home prices haven't gone up. Real home prices were essentially unchanged over that interval."

There are bursts of growth, as in the past 10 years in Canada, but historically they are offset by retreats.

Shiller says real estate bubbles are nothing more than groupthink, and that they "always have their end built into them."

"People are investing in real estate that is tough for their budgets because they think it will make them rich, and that can continue only as long as [prices] keep increasing.

"When they stop increasing," he says, people back off, and the bubble then collapses. "So it has its own internal dynamic."

Quote:Little was heard of housing bubbles in Canada up to about a year ago. Now, predictions of crashes are on the front cover of Maclean’s and other publications. One might wonder if we are talking ourselves into a housing miasma, even though the fundamentals don’t point to one.