Housing market is ‘overheated, overvalued’ says CMHC
Canada Mortgage and Housing Corporation (CMHC) warns the housing market country-wide is overheated and overvalued, and at risk of a downturn.
It cites price acceleration as the main issue. CMHC, in its recent housing market assessment, notes, “exceptionally strong demand and home price appreciation over the course of the pandemic may have contributed to irrational expectations of continued price growth and, in turn, more buyers entering the market than was warranted.”
As a result, CMHC has issued its highest risk rating for the country. It’s the second time CMHC has issued a warning for the entire country. The first was during the real estate frenzy in Toronto and Vancouver 2016-2017 when prices rose at a record pace.
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The current boom has spread into smaller cities and suburbs, with buyers taking advantage of low mortgage rates to purchase bigger properties. Home prices in some parts of Ontario are 35-55 per cent higher than before the pandemic. Prices in Barrie in August averaged $748,686 – 2.6% more than the average price during July. Sales from July to August fell 19.6 per cent.
CMHC says steep price increases across most of Canada have worsened affordability.
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Among the Liberal Party’s promises during the federal election was to help young people get into the housing market. One proposal is to slash CMHC’s mortgage insurance rates by 25 per cent. CMHC has yet to comment on the proposal.
