Historical Housing Busts

Will Canada Correct more than the U.S. ?

Historical Housing Busts
SOURCE: Goldman Sachs Research via Pragmatic Capitalism. Read Full Report

The chart shows the historical distribution of housing market corrections for all the developed market nations and periods in the study. Based on the research, it turns out that the US housing bust was severe but not unusual; the 30-35% correction in the US housing market is not outside the range of other housing busts. 

The study found that after the bust, the economy experiences the following trends:

1. The GDP growth is sluggish for a prolonged period.
   
2. High unemployment and relatively high output gap persists.
3. Double-dip recessions are not common.
4. The private sector deleverages while the public sector leverage increases.
5. Interest rates remain low for a long time6. Stock returns are modest, consistent with slow GDP growth.

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