How about a little good news to start the week out right?

A special report published today by two Bank of Montreal economists stated that while the Canadian housing market will cool, it will not crash as some have predicted.

In their report, Dr. Sherry Cooper and Sal Guatieri acknowledged that Canadians were frequently confronted with predictions of an imminent collapse of the country’s overvalued housing market. However, the two senior economists argue that “the housing market will more likely cool than correct, even in condo driven Toronto.”

The pair likened the Canadian housing market to a balloon instead of a bubble. A bubble simply pops whereas a balloon’s air seeps out slowly in the absence of a pin.

Cooper and Guatieri noted that “With the exception of a few regions, valuations remain only moderately high across the country, especially when low interest rates, demographics, construction costs, land-use regulations and foreign capital inflows are considered.”

Phew! That’s a relief isn’t it? Especially when international observers from The Economist magazine to the International Monetary Fund have taken the time to issue warnings that our housing market is overvalued and destined for a significant correction.

We like to think that nobody knows the Canadian housing market better than Canadian economists, so we read the BMO report with great interest. Here’s a few more highlights from the document:

• Canadians are not close to an American-esque debt wall that precipitated the sub-prime crash in 2007, Canadians have nowhere near the debt burden that Americans did
• Canadian household debt levels relative to income are not as worrying as some have suggested
• A cool down is likely and Canadians should expect starts, prices and sales to slow this year
• Except for a few remaining hot spots, the Canada-wide housing boom has cooled
• In Toronto, a lack of single-use rental apartment construction has shifted the rental market into condominiums
• Few signs of overbuilding across the country, housing starts are hovering moderately above household formation rates
• National prices have steadied since mortgage rules were tightened in March