Benjamin Tal, senior economist for CIBC World Markets told delegates at the Canadian Association of Accredited Mortgage Professionals (CAAMP) conference in Montreal that the U.S. housing collapse is unlikely to rebound soon, and that it will take until 2017 for house prices to rise to the point where the average person in the U.S. is able to get out of negative equity. He said what is leading the U.S. economy right now is “a renaissance of the U.S. manufacturing sector” something being driving by emerging markets. He said Canadian companies can take advantage of this as suppliers to U.S. firms.

His advice to brokers when discussing the economy was “You can’t just discuss the Bank of Canada, You need to discuss the U.S., China and emerging economies.”

Commenting on the global economy, Tal declared “the Chinese consumer will be the most important force in the global economy for the next 10 years.” He said this is good for North America, as the Chinese are “starting to demand quality” and would buy more goods.

Tal said this recovery timeframe is critical as America’s housing market is what is driving its economy, and so this will impact other economies, as well as interest rates for mortgage holders.

Tal said he was “almost positive the [U.S. Federal Reserve] will not change rates until mid 2012” and that the Bank of Canada would not “take chances” and raise rates significantly above the U.S.

While “the next few quarters are safe” from Bank of Canada rate hikes, Tal said Canadian consumers are “exhausted” due, in part, to a 146% debt-to-income ratio, and as a result, it won’t take many rate hikes in future to slow the economy. Tal also indicated a housing crash wasn’t in the cards. For that to happen you need two things, higher interest rates and poor quality mortgages, both of which are absent in Canada. “The trend of the vulnerable sector is declining as a share of the mortgage market,” he said.

However, Tal said that if rates rise, mortgage defaults will actually drop. He explained that is because rising rates imply rising employment, which influences defaults more than anything.

– John Tenpenny, Editor, CMP