Watching the situation in Canada right now is a little like staring into a time warp.

A house-price explosion has followed the Canadian recession. Prices have climbed 23.3% in just 12 months, and are now nearly 3% higher than they were before the housing market crashed.

Household debt to income in Canada is now more than in the US. All the usual guides as to when property is overvalued are miles above the norm: the House Price/Income relationship, for example, is a third higher than a healthy housing market can support.

Most of the money to buy is coming from the Canadian Mortgage & Housing Corporation. In the Canuck meltdown to come, this is the unique element that will drive things over a cliff, for the CMHC is a crown corporation. The Canadian government directed them to insure hundreds of billions in mortgages. So the banks make the loans and immediately sell them to CMHC. They get all the fees and take almost no risk.

Banks eh? Doncha love ’em?