OTTAWA - Canadian households are even more in debt than anyone imagined, according to a revised Statistics Canada calculation that gives a more accurate picture of family finances.
The revisions place household credit market debt in the second quarter at 163 per cent of disposable income, well above the previously reported 152 per cent, although the two levels are no longer a direct comparison.
The new numbers remove non-profit institutions from the household category, giving a more accurate accounting of family finances.
The revision shows debt growth over the last decade that looks "eerily similar to the U.S. experience, just before their dramatic housing bust," said David Madani, an analyst with Capital Economics.
"Overall, this supports our bearish view that Canada's housing boom is unsustainable and the eventual correction, which we think is already underway, is likely to have a material negative implications for growth," he said.
The revisions show a much steeper climb, with debt growing in each of the past six quarters.
Madani doubts the news will cause Bank of Canada governor Mark Carney to hike interest rates, however, saying that point has past given the slowing housing market and still weak global economy.
There was some good news in the revised data.
It turns out Canadians have more assets than previously thought, with per capita net worth rising $7,900 to $190,200 due mostly to an improved calculation of holdings in unlisted company shares.
Nevertheless, TD bank economist Diana Petramala said the overall results show Canadian households are more vulnerable to a housing correction than previously thought.
That's because although Canadians hold more assets than their counterparts in the U.S. and the U.K. did before the crash, most of those assets are locked into the value of their homes, which could take a tumble in a housing correction or if the economy tanks.
At the peak of the U.S. housing bubble in 2007, household debt to income there hit a high of 170 per cent.
Still, analysts caution that Canada's housing market is on a more solid footing than was the case south of the border.
Canadians tend to hold more equity in their homes and many of their mortgages are backed by the federal government through the Canada Mortgage and Housing Corp. As well, risky subprime mortgages represent a small percentage of lending.
Ottawa has moved four times in as many years to tighten mortgage rules to keep marginal buyers out of the market, most recently in August.
The latest change, which added to monthly payments on insured, first-time purchases, has been partially credited with a recent slowing in home resales, particularly in previously hot markets of Vancouver and Toronto, and with a moderation in prices.
New data released Monday by the Canadian Real Estate Association showed sales of existing homes fell 15.1 per cent in September from a year ago, although last month's numbers were slightly higher than in August.
Bank of Montreal economist Doug Porter said he believes the trend points to a soft landing for housing, not a crash.