CMHC Raises National Housing Market Risk to “High”

CMHC Raises National Housing Market Risk to “High”

High home prices and buyer expectations of continued price growth have put the country’s housing market at increased risk of a correction, Canada’s housing agency said on Tuesday.

The Canada Mortgage and Housing Corporation (CMHC) raised its national risk level to high from moderate in its third-quarter Housing Market Assessment report.

This is only the second time the national risk level has been raised to high, the last time being during the “frothy” housing market of 2016 and 2017.

“Exceptionally strong demand and home price appreciation through the course of the pandemic may have contributed to increased expectations of continued price growth for homebuyers in several local housing markets across Ontario and Eastern Canada,” Bob Dugan, CMHC’s chief economist, said in a release. “This, in turn, may have caused more buyers to enter the market than was warranted.”

Improved housing fundamentals in the first half of the year, such as historically low interest rates, government support programs and the rollout of mass vaccination programs, led to an increase in purchasing power, disposable income and employment, CMHC noted. These factors, however, weren’t enough to justify the rapid price growth over this period.

The housing agency said the high vulnerability at the national level was “largely a reflection of problematic conditions in several local housing markets across Ontario and Eastern Canada.” This included Montreal’s vulnerability being raised to high from moderate.

Vancouver’s market vulnerability, on the other hand, was reduced to a “low” rating following a slowdown in price growth and home sales.

The post CMHC Raises National Housing Market Risk to “High” appeared first on Canadian Mortgage Trends.

Steve Huebl

Steve Huebl is a graduate of Ryerson University's School of Journalism and has been with Canadian Mortgage Trends and reporting on the mortgage industry since 2009. His past work experience includes The Toronto Star, The Calgary Herald, the Sarnia Observer and Canadian Economic Press. Born and raised in Toronto, he now calls Montreal home.