Analyst: CMHC to blame for pending 40-50 per cent price correction

by |
A leading financial advisor is projecting a 40-50 per cent housing price correction and is laying the blame on the CMHC.

Puffed up by years of ultra-low borrowing rates, home values have bloated to levels so far out of sync with the underlying incomes needed to support them, it’s only a matter of time before one headwind or another blows over the house of cards.

According to Global News, a new book, When the Bubble Bursts, was released this month across the country, and is one of the most fulsome looks yet at the current state of Canada’s much-fretted over real estate market. Author Hilliard MacBeth says the Canadian real estate market is poised for a painful 40 to 50 per cent drop in value when the bubble pops.

“The availability of financing. Canada is unique in the world in the availability of government insurance through CMHC [Canada Mortgage and House Corp.], that’s allowed the lenders to lend a phenomenal amount of money. [Household] debt levels have gone from one trillion dollars to $1.8 trillion, just in 15 years," the report says.

“I think the government has genuinely tried to encourage the housing market and home ownership, which started after the Second World War. But in the last 15 years it’s kind of taken on a life of its own. It’s this monster that nobody can really tame. The reality is, lenders don’t really take any risk, so they keep on providing more and more [loans].”
 
  • Jake Abramowicz on 2015-03-18 4:46:05 PM

    I can't help but laugh at the headline.

  • Andy on 2015-03-18 4:46:33 PM

    UNSUBSCRIBE

  • James Catterall - Mortgage Architects on 2015-03-18 4:50:10 PM

    Pure fearmongering and clickbaiting. Not even a new position. Not happy with this kind of journalism from MBN...

  • Mr Dubious on 2015-03-18 4:50:10 PM

    Alarmist headline. Yes, values have risen high (in some areas too high), but 40%-50% "correction" is alarmist to say "the market" will face this and paint the entire country with this filthy brush.

  • TS on 2015-03-18 4:52:12 PM

    Unfortunately the author has very little experience in Real Estate. He credits himself as being a financial expert. Perhaps he should stick to his own field instead of not truly understanding this one he is writing about. I had the displeasure of chatting with him and he is short on facts and long on BS

  • Tatiana Tisser on 2015-03-18 4:54:14 PM

    Very shallow and misleading article

  • Paul Hudson on 2015-03-18 4:57:23 PM

    Most people would not sell their homes if the market dropped by 40 or 50%, instead they would choose to stay put. It sounds like a great premise for a book for people who subscribe to conspiracy theories. I'm sure the author will garner a following from a handful of jaded people who don't own real estate.

  • John on 2015-03-18 4:57:27 PM

    I can't believe the headlines they're using to lure people to this site for what is typically a 250 word assemblage of barely related content.
    Waste of my time... but I keep coming back for more.
    I used to watch "Here comes Honey Boo Boo" too...probably says more about me than CMP lol

  • Jason on 2015-03-18 4:58:56 PM

    Here is his quote from his interview with the G&M in Sept, 2014

    "The housing market pretty well dries up starting in about October, November and then the new wave starts in February or March. I would think that, depending on the price of oil, depending on world economies and all that, we’ll see next spring, next summer."

    Every year someone mentions the impending housing bubble and this year, like the previous, they will be disappointed.

  • Bert Czombos on 2015-03-18 4:59:30 PM

    That's like blaming the auto insurance companies for car accidents, because they wrote the policy? If people choose to drive 130Km /hr that's the insurance companies fault? The guy wrote a book, and he's trying to sell it. Perhaps in his next book he can explain how the government will freeze the prices of homes? Dictate to the public how much we can sell our houses for ? Absurd.

  • Rob on 2015-03-18 5:03:06 PM

    CMHC should not be insuring the banks collateral mortgages. Our government / CMHC is insuring everyone's dept that has a collateral mortgage.

  • Local Appraiser on 2015-03-18 5:08:08 PM

    ZZZZZZZZZzzzzzzzzzzzzzzzzzzzzzzzz

  • Jose on 2015-03-18 5:09:23 PM

    UTTER RUBBISH

  • Jay on 2015-03-18 5:10:51 PM

    As the Italians say... GARBAGIO

  • Rick on 2015-03-18 5:18:58 PM

    Mortgage Broker News........ Get a life, stop the garbage and fire the guy who allowed that headline.

  • Henry on 2015-03-18 5:25:02 PM

    1 100% agree, specially in GTA the house prices are very high. The big crash is comming

  • Henry on 2015-03-18 5:25:05 PM

    1 100% agree, specially in GTA the house prices are very high. The big crash is comming

  • Barb a Centum Mortgage Store on 2015-03-18 5:27:06 PM

    I was a Banker for 35 years, in one of the major banks in Canada. Trained lenders in my career and was in marketing. In my experience, we never approved a mortgage because it was going to be insured. The client had to have all the qualifications before we approved the application, then sent it to CMHC to insure only because of the limited amount of down payment OR the property did not qualify under a standard conventional mortgage. I see no difference now.

  • Hamid Riahi on 2015-03-18 5:28:22 PM

    I think the writer does not know the principals of the real estate! since 1954 Ottawa prices on average gone up 6.7% up. The cost of reproduction new homes is higher than resale home prices. So how can it can go down?!

  • Guy Lew on 2015-03-18 5:29:46 PM

    I can imagine what CMHC is thinking reading this headline? Maybe someone in risk is reading this and rethinking why they are declining 75% of the files that is causing so much hardship to clients and agents. I am seeing declines for all sort of reasons, I had a decline for a 700 plus beacon score healthcare worker on salary working two full time jobs supported by 2 years T4, NOA and paystubs get decline by the insurer because she had two full time jobs and not one. Maybe CMHC deserves this shock headlines.

  • Van Isl Broker on 2015-03-18 5:44:34 PM

    Why oh why is MB News giving even a moment to this garbage?
    Is there not any real mortgage news out there?

  • Anthony on 2015-03-18 6:15:29 PM

    Well if your a short seller such as names equitable bank home trust you have made significant profits last 6 months and they continue short Canada (Gerry soloway personal net worth has decreased $28,000,000) I guess eventually when the crash occurs we will be able to eradicate the mortgage brokers who lets face it should be in another vocation

  • Chris Richards on 2015-03-18 6:27:44 PM

    The actual pending, official, soon to be announced percentage correction in housing prices, coast to coast, per my friend's sister's son's BFF is actually 43.14159265358979323846264338327950288419716939937510582097494459230781640628620899862803482534211706798214808651328230664709384460955058223172535940812848111745028410270193852110555964462294895493038196442881097566593344612847564823378678316527120190914564856692346034861045432664821339360726024914127372458700660631558817488152092096282925409171536436789259036001133053054882046652138414695194151160943305727036575959195309218611738193261179310511854807446237996274956

  • Mr Ford on 2015-03-18 7:14:17 PM

    Who is at the helm of these articles coming out of Mortgage Broker News???? Absolutely pieced and hacked articles for the last year I've been a reader. Sadly I have to keep up with the SH*T comments and articles as the average uneducated consumer is who we have to deal with when poor stories like this filth is circulated

    Whoever it is... Give your head a shake

  • BILL DURFY Sres on 2015-03-18 7:14:39 PM

    I BEEN IN BUSINESS FOR OVER 27 YEARS
    DON'T THINK FOR MINUTE THE BANKS WOULD INVEST IN A DEAD HORSE. Why are foreign buyers flocking into Canada
    RE/MAXBLUEWATER REALTY INC."BROKERAGE

  • Dowarka on 2015-03-18 7:18:58 PM

    MBN does it again....this got to be most uninformed newsletter out there.

  • Mark Olkowski on 2015-03-18 9:42:31 PM

    Yet another person trying to sell a book.
    40-50% drop in property values? In 1981 interest rates spiked to more than 20%, and house prices did not decline by 40-50%.

    Why don't you just say the value decline will be 80-90% (you might sell more books).

    I think I am also going to write a book. All I need is a shocking title with ridiculous claims based on conjecture and supposition.

    To the Author of this book "When the bubble bursts" I offer you this challenge. Lets have a debate and discuss your book and its suppositions of the 40-50% reduction in value. I am sure we can arrange some press and cameras to be present.
    If you win, I will buy a case of your books. If you lose, you will buy a case of mine. Not sure of the title of my book yet, but I will let you know.

    (Anyone have any good titles for a book)?

  • Mark Olkowski on 2015-03-18 9:56:17 PM

    I hope Hilliard MacBeth is advising all his clients to sell all of their real estate investments and personal house to rent somewhere.
    I mean... if a good financial planner thought that property values would go down by 50%... he MUST be telling his clients to sell all real estate assets right?
    Wait. What?
    He's not telling them to sell their house?
    Hmmm. I wonder why not?

    I also wonder if Hilliard owns a house right now?

  • Andrea on 2015-03-18 11:08:05 PM

    Yes, and of course it would be Global News that picked up the story, as they're sooo known for their factual delivery of news.... or stories....
    & CMHC is to blame? Obviously this person has never been in the banking/loan industry.... we all know what qualifiers are, there is no "blind lending" here... perhaps in the States at one time, funny, we survived that crisis.... hmmm... G.T.A. is an international market now,,, do you see housing costs plummeting in NYC or LA? Guess what? It won't happen here either! Trash journalism from an inexperienced person, and yes, Mark, do you think he is advising his clients to sell now???? You hit the nail on the head..... I've been in the business since '88 & my family since the 50's, nice to ride on the tide, but I highly doubt we'll see 18% mortgages that put people out of their homes. Mr. MacBeth sounds like a character out of a story created by Shakespear himself, "Lessor be thy lender not, for all shall fall to ruin".....

  • Joe White on 2015-03-18 11:38:42 PM

    In our industry we should be talking to each other about facts, not conjecture. That is the realm of the tabloid. If a publication wishes to speak to the masses (consumers), that is a valid business model.
    However, a publication speaking to industry participants owes it to the industry to have an honest dialogue that sharpens the industry's understanding and perception of the market to assist the industry in better serving consumers.
    I appreciate reading articulate, well informed articles that assist me in providing consumers with leading edge information.
    I value what CMP tries to do.
    However I feel that if CMP wants the support of the mortgage brokerage industry through readership and sponsorship it needs to produce more content that assists the brokerage industry in expanding its market penetration.
    CMP has the knowledge and resources to do this; I look forward to it assisting the brokerage community in shattering its glass ceiling of 25% (estimated) market penetration by providing topical articles that provide ammunition to mortgage brokers, not simply hyperbole.

  • robg on 2015-03-19 10:23:52 AM

    the usual crap from MBN. Pure drivel. Hey MBN I hear TMZ is hiring.....

  • Brian Lambert on 2015-03-19 12:03:15 PM

    What "BS"? If you put it in perspective, since the 80's after the housing collapse, the market took 14 years to recover. Home valuation started to rise in 2000 and have gone up 100 - 130% in some locals, not everywhere? The bubbles are largely in bigger city centers which are slowly cooling off. It is the media frenzy that fuels this ludicrous idea. It is big money especially from U.S. short sellers that fuel this notion. These U.S. short sellers are counting on a U.S. style housing collapse and are counting on making billions. It is drivel like these type of articles that cloud peoples judgment including the media and government. Its articles like this that create panic in a market place and push the story lines to reality. The Government needs to speak out against this type of propaganda coming from the press and OECD and speak out to the Canadian people to instill calm in the markets and a voice of reality. If not you may get what you fear the most.

  • Doug King on 2015-03-19 2:57:44 PM

    This is to reporting as finger-painting with shit is to art!

  • Doug King on 2015-03-19 3:01:37 PM

    This is to reporting as finger-painting with shit is to art!

  • Kuldip S Panesar Homeland Mortgage Corp. on 2015-03-19 4:30:15 PM

    What is the qualification of the Financial Adviser and his experience in Financial Market He must write his name and qualification and experience before sending such articles in the public platform .Editor or the Controller of Mortgage Brokerage News must examine these articles before making them in public .He is not having any knowledge or too little knowledge of Real Estate Industry .
    I am in the mortgage industry since 2003 and previously was a banker in senior potions for 26 years. I was also a student of economics (M A Economics and B A Honors in Economics.) During my entire period of experience I have not seen any drop in the prices of real estate , prices of the real estate is increasing year over years . I would like to mention here the real estate prices in the Asian Countries specially in India ,China ,Hong Kong are increasing and never coming down . Moreover there is no mortgage insurance in these countries. There is also inflation rate and other factors pushing the prices of real estate such as increase in population ,limited availability of land ect.etc. I do not know how these adviser are advising the public . This may be because they want the people to invent their money in their stocks rather than buying the real estate.
    I would like to advise that stock prices can go 50 % down or to zero , but not Real estate .

  • as is on 2015-03-19 4:51:00 PM

    i agree with the author: real estate values in Canada are in a bubble and totally disconnected from incomes/rents.

    I strongly disagree with the author on the cause of the bubble. The Fed's QE and ZIR policies have caused bubbles in a number of asset categories (stocks, RE). Same phenomenon is observed in Japan, and has started recently in EU, following similar policies of BoJ and ECB. Australia is no exception either. The central bank of Canada is tied at the hip to the Fed, and cannot unilaterally increase IR.

    The fed does not have IR-increase exit strategy because of the US debt and the leveraged financial structures (mainly the bond market).

    Hold on to your hats. Whenever it comes, it will be the mother of all crashes. And CMHC is the last entity to cause it, but the taxpayers in this country will have to mop it.

  • Jose on 2015-03-19 5:50:12 PM

    To Trevor Biggs - "If a mortgage broker's potential client had seen these reports, is it not valuable to know what he is saying?"

    Not if the content is nonsense and not backed up by fact. In fact I do believe you and your publication have done this just to get more readership as was previously mentioned. You should be ashamed to even suggest that this is relevant news or that there may be any truth to it when 99.9 % of the comments ridicule this article.

  • Ron Butler on 2015-03-19 6:47:19 PM

    All Real Estate markets are local. Today we have values rising in some markets, declining in others. Just a note to Kuldip that real estate values do indeed come down. Right here in the GTA prices dropped in between 1989 and 1990: 26% for Single Family, 34% for condos. It can happen.

  • Broker on 2015-03-20 2:43:21 AM

    CMHC is to blame... from 'ultra low borrowing rates'. When you combine these two statements I cringe. At what point has CMHC dictacted any home buyers interest rate? Never. At what point did CMHC force a bank to offer a specific interest rate? Never.... Does CMHC have anything to do with interest rates??? Not at all.

  • Logical on 2015-03-20 10:26:27 AM


    Great article. Very true. Finally someone has the balls to state the obvious truth. I cannot help but laugh at the stupid comments made by the real estate shills here

  • Logical on 2015-03-20 10:26:56 AM


    Great article. Very true. Finally someone has the balls to state the obvious truth. I cannot help but laugh at the stupid comments made by the real estate shills here

  • House of Cards on 2015-03-20 11:52:05 AM

    It's obvious to everyone including the RE shills who are posting here that the numbers do not support this house of cards. Debt to income ratio sits at a mind blowing 164% which is MUCH higher then when the US housing bubble blow up. Remove CHMC and see the bank stop lending over night. Canada RE is a house of cards.

  • mo money on 2015-03-20 11:58:50 AM

    I know we all make our money here by providing mortgages. and when we hear of the report of bubbles that will eventually pop we don't like to hear the "Music"
    There are a tonne of our clients buying 5% down on their homes and once you add in the cmhc they only have 2% equity in their house to start.

    So if/when the market corrects 20% they will be majorly underwater and can't sell their homes. And the collateral mortgage they are in won't go away

    So yes I think it is fair to blame CMHC for creating these bubble conditions.

    For the love of Pete young twenty somethings get "gifts" from their parents for 50,000 to buy a house because they can't save up any money themselves.

    So yes, there will be a crash coming followed by a recovery... Real Estate market is a market. and like any market prices go up and down and back up again.

    This isn't saying that the financial author is right or wrong. However I did listen to his talk on the news a while ago. And I think that yes there is a correction that will take place.

    It's good to live with a little fear. It makes you work harder, save a little money for a rainy day guys. That is what we should be doing.

  • mo money on 2015-03-20 11:59:55 AM

    I know we all make our money here by providing mortgages. and when we hear of the report of bubbles that will eventually pop we don't like to hear the "Music"
    There are a tonne of our clients buying 5% down on their homes and once you add in the cmhc they only have 2% equity in their house to start.

    So if/when the market corrects 20% they will be majorly underwater and can't sell their homes. And the collateral mortgage they are in won't go away

    So yes I think it is fair to blame CMHC for creating these bubble conditions.

    For the love of Pete young twenty somethings get "gifts" from their parents for 50,000 to buy a house because they can't save up any money themselves.

    So yes, there will be a crash coming followed by a recovery... Real Estate market is a market. and like any market prices go up and down and back up again.

    This isn't saying that the financial author is right or wrong. However I did listen to his talk on the news a while ago. And I think that yes there is a correction that will take place.

    It's good to live with a little fear. It makes you work harder, save a little money for a rainy day guys. That is what we should be doing.

  • Ron Butler on 2015-03-20 12:06:45 PM

    If wage inflation is 1.7% and the price of homes in the GTA goes up 7% per year for the last 3 years and potentially 9% this year I don't really know how those lines can continue to diverge eternally.

  • mo money on 2015-03-20 12:40:48 PM

    Ron is a smart guy. Everyone do the math. That financial author did.

    He researched trendlines in boom bust cycles and it basically comes to a looong term average of 3%

    not a steady year over year 3% some years higher and some lower.

    Now enough of reading this post.

    go get a new mortgage done

  • mo money on 2015-03-20 12:40:59 PM

    Ron is a smart guy. Everyone do the math. That financial author did.

    He researched trendlines in boom bust cycles and it basically comes to a looong term average of 3%

    not a steady year over year 3% some years higher and some lower.

    Now enough of reading this post.

    go get a new mortgage done

  • Jake Abramowicz on 2015-03-20 3:18:59 PM

    David Madani from Capital Economics has been spouting the same garbage for how long now? Eventually, he and the author of this report will be right in some form - the market will correct itself, it HAS corrected itself in some parts of our vast country. Is this kind of headline-grabbing news relevant to our buyers/mortgage clients? Sure it is. But since no one has thus far accurately predicted the direction of the market, I take stuff like this with a grain of salt.

  • Kuldip S Panesar Homeland Mortgage Corp. on 2015-03-21 4:54:44 PM

    Hi no money ,
    if the prices of the real estate is increasing @ 3 % ( as you said )in ten years the price will be up 30 % .
    Go to the school and learn the math calculations.

  • MtgBrker on 2015-03-24 12:01:27 PM

    It pains me to read some of the un-educated and uninformed responses by some mortgage brokers purporting themselves as financial experts (think Kuldip). Concerning. Ron Butler seems to have taken a more rational and pragmatic approach to this topic.

  • RKRC on 2015-03-24 12:08:57 PM

    Has anyone read this book and if you did, did the author mention.... without homes values anywhere in Canada changing one cent, the National Average Selling Price used by CMHC, CREA, BoC, etc. can drop 20% overnight.

    Now obviously he did not and as such this book is worthless.

    Did he mention Canadians are moving on Average only once in 22 3/4 years and even in the so called "hot" markets once in over 16?

    Of course not.

    Now maybe you want to believe CAAMP who said 210,000 first time buyers bought a home in 2014......really.

  • Arbitrage on 2015-03-24 12:23:36 PM

    @Kuldip. Please don't "educate" anyone else with your math. $350K home with 3% annual increase is worth $470K(ish) in 10 years. This is because with each passing year the 3% increase occurs on top of the previous years 3% increases. This is what year over year means. To simply add 30% to $350K (and arrive at $455K) is bad math and results in a 4-5% error.

  • Shawn Shell on 2015-03-28 2:49:36 AM

    As a mortgage broker seeing what is really going on, I have to say I agree the market will go down at some point soon - who knows how much. To say it will keep going up forever is utter nonsense - no market in the history of the world has ever done so. The bull market is driven by cheap money and CMHC.

  • Rick Rayburn on 2015-03-29 1:17:22 PM

    I was surprised by the comments here which are largely discounting the idea of a major housing bust...until I remembered that I was on a mortgage broker website...duhh!

  • Trevor Biggs - Associate Publisher on 2015-03-19 3:30:35 PM

    Interesting comments on this item for sure. However it would seem that some people think that we wrote the book in question.

    In fact the author of the book was on The Exchange on CBC Monday night. Whether you think his argument was relevant or not (and whether he might have a biased take on real estate investment vs equity investing) the fact remains he was on major networks talking about this.

    If a mortgage broker's potential client had seen these reports, is it not valuable to know what he is saying?

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions