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The annual springtime battle for Canada's mortgage market spotlights the fascinating question of just how much more growth can be expected from a housing market that has already exceeded all precedent.

Consider this: At the height of the U.S. housing bubble in 2006, when lenders merrily handed out loans to anyone who could spell IOU, the home ownership rate in the United States topped out at 69.2 per cent.

Canada hit the 69 per cent level back in 2011, which was the last official number available. Given the vigorous state of the housing market since then, it seems a safe bet that our home ownership rate now equals if not exceeds that which prevailed in the U.S. at the peak of its bubble.

For some observers, like Royal Bank of Canada CEO David McKay, who insists that the Canadian housing market is in fine shape, this amounts to nothing more than a numerical coincidence. It's not elastic credit standards that are driving Canadian real estate prices, according to the housing bulls; it's factors such as strong household formation and immigration.

Well, maybe. But it is interesting to note that Canada's home ownership rate is now on a par or above that which was achieved by its southern neighbour during one of the maddest, goofiest lending sprees in its history.

For decades, home ownership in Canada lagged slightly behind the level in the U.S., but Canadians are now the clear front runners in the continental home-buying competition.

This suggests a couple of things. First, that there might be just a bit of irrational optimism embedded in Canada's housing market. Second, that it's going to be increasingly difficult for Canadian banks to find a lot of new, credit-worthy borrowers.

Year-over-year growth in mortgage loans at Canada's big banks has already slowed dramatically from more than 9 per cent in late 2013 to under 5 per cent now, according to analysts at Macquarie Group Ltd.

Lenders will face a stiff challenge in improving that lacklustre growth rate unless Canada's home ownership rate climbs even higher or prices ascend even further into the stratosphere.

Both are possible, of course. "There's no magic number" for home ownership rates, says Steve Pomeroy, a housing policy expert and researcher at Carleton University.

He says the strength of the Canadian housing market in recent years reflects historically low interest rates, strong economic growth and high levels of immigration. However, he notes that there are few examples of prosperous, developed countries in which the home ownership rate stands much above 70 per cent.

In fact, countries with high levels of home ownership are often economic laggards – Greece, Italy, Portugal and Spain, to name four.

Some economists, including Atif Mian of Princeton University and Amir Sufi of the University of Chicago, have questioned the widespread fascination with home ownership.

In their book, House of Debt, Prof. Mian and Prof. Sufi show how home ownership coupled with high levels of debt can act as a point of vulnerability, saddling people with obligations they can't meet in bad times and prolonging economic downturns.

Given the remarkably high levels of home ownership already achieved in Canada, further gains of similar magnitude seem unlikely. And that may be a good thing if the professors are right.

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