A slight correction may be imminent, but is there cause for concern?

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Fitch ratings believes the Canadian housing market is at risk of only a slight correction.

“Overall, Fitch continues to expect a soft landing nationally, where the price growth that has characterized the country's housing markets for more than a decade will abate, with modest declines to follow,” Fitch wrote in a recent release. “While Fitch expects modest price declines in the medium term across the country, significant downturns remain unlikely. But, downside risks exist, particularly in markets that have been dependent on robust construction and real estate activity in recent years.”

Certain markets are more susceptible, according to Fitch.

Alberta, which has been plagued by low energy prices will continue to experience housing price volatility. Prices have been down three per cent since October 2014.
And brokers can expect even more shocks to the market, according to one player.

“I don’t think we’ve seen the last of the layoffs (in the oil industry),” Calgary-based broker Luke Wile told MortgageBrokerNews.ca. “Once the layoffs have all been made and the nine month (severance) packages have lapsed we’ll see bigger effects.”

Vancouver and Toronto, meanwhile, are better safeguarded by strong economies and population growth.

“Fitch views housing markets nationally as approximately 20 per cent overvalued in real terms, with modest variation across provinces. However, a number of positive market factors are expected to moderate any negative price pressure,” Fitch wrote. “Most importantly, the Canadian mortgage market does not have significant exposure to riskier mortgage products that would be at high risk of default.”

The Bank of Canada lowered its target for the overnight rate to 0.5 per cent last week, and several big banks followed with slashes to their respective prime rates.

TD Bank was the first, lowering its rate by 10 basis points to 2.75 percent. RBC and the Bank of Montreal followed with 15 basis point cuts of their own, lowering prime to 2.70 per cent.
  • Where is my tylenol? on 2015-07-21 11:29:40 AM

    There is no slight correction when people lose ability to service their debt obligations due to job losses and/or rate increase (and that's all coming). Oil will not recover to levels we've seen in 2014 anytime soon if ever. Iran/US nuclear treaty will cause lift in oil embargo and ensures additional crude on the market, being a reason it fell below $50 in recent days. Negative effect of the oil collapse have not been completely addressed yet because of federal elections. Our economy is in shambles and articles alike are only to spread fake sense of security and hope.

    Vancouver and Toronto, meanwhile, are better safeguarded by strong economies and population growth, is yet another misleading statement. We build 2 houses for a single citizen entering the workforce as reported last night by Huff Post. There is a condo surplus and all you need to do is to drive through condo areas such as Sheppard and Yonge in TO to see that 60% of buildings are with lights off. And that is NOT because people are sleeping at 9:30pm.

    - Recourse mortgage = complete borrower responsibility. If you can’t pay on time, it’s all your fault. Bank will hunt you down to get back every last penny.

    - Non-recourse mortgage = shared responsibility. If you couldn’t pay, maybe the bank shouldn’t have lend that much to you in the first place.

    - Recourse mortgage => lend to anyone who can fog a mirror, especially with backing from CMHC, during the good times. Completely devastate borrower’s personal finance during the bad times. ==> more economic gyration.

    - Non-recourse mortgage => caution with lending during the good times, and borrower get a clean start in bad times. ==> more economic stability.

  • Vahid on 2015-07-21 4:56:49 PM

    Isn't Fitch the one that said US economy was hunky dory JUST before the Big Crash?

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