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Canada Housing Regulator Warns Of “Strong Evidence Of Housing-Market Problems”

Canada Housing Regulator Warns Of “Strong Evidence Of Housing-Market Problems”

April 26th, 2017
Business and Finance

In a peculiar coincidence, just hours after Home Capital Group imploded in what we dubbed Canada’s “New Century” moment, Canada’s housing regulator, the Canada Mortgage And Housing Corporation, which describes itself as “contributing to the stability of the housing market and financial system” moments ago the CMHC issued a report, warning that there is “strong evidence of overall problematic conditions.

In the report, the Housing regulator again warns that while conditions in Canada’s housing markets are showing some signs of improvement, the official overall rating from the Canada Mortgage and Housing Corporation (CMHC) will be held at “strong evidence of problematic conditions”.

Every quarter, the CMHC issues its Housing Market Assessment (HMA) “to provide Canadians with both expert and impartial insight and analysis, based on the best data available in Canada.” The report is meant to serve as an “early warning system” for the country’s housing markets “an important tool supporting financial and housing market stability.” Or lack thereof because as the CMHC said while “conditions in Canada’s housing markets are showing some signs of improvement” the official overall rating from the Canada Mortgage and Housing Corporation (CMHC) will be held at “strong evidence of problematic conditions”.

As noted in the press release, some of the report highlights are the following:

  • Overall rating to be held at “strong evidence of problematic conditions”.
  • Evidence of overvaluation at the national level has been downgraded from strong to moderate. It is now present in six centers instead of eight.
  • Evidence of overvaluation has increased from moderate to strong in Victoria, as fundamentals are not keeping up with higher prices. There is also moderate evidence of price acceleration and overheating, leading to strong overall evidence of problematic conditions.
  • Conditions have improved in Regina, Montreal and Quebec relative to home prices.
  • Overbuilding has gone down from eight centers to six.
  • In Moncton and St John’s, the supply of homes is adjusting to the demand.
  • Toronto and Hamilton continue to face price acceleration, overvaluation and overheating. Price growth has intensified and demand is outpacing supply in the rental, resale and new home markets.
  • Vancouver’s housing market continues to show strong evidence of problematic conditions due to moderate evidence of price acceleration and strong evidence of overvaluation.
  • Markets in the Prairies continue to show moderate to strong evidence of overbuilding.

CMHC defines “problematic conditions” as imbalances in the housing market. Imbalances occur when overbuilding, overvaluation, overheating and price acceleration – or combinations thereof – depart significantly from historical averages. 

 

Zero Hedge

 

Full CMHC report can read here.

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