“CMHC has recently observed spillover effects from Vancouver and Toronto into nearby markets. These factors will be reflected in our forthcoming Housing Market Assessment on Oct. 26,” the CMHC announced last week.
Among the problematic conditions that CMHC looks out for is overvaluation, overbuilding, overheated demand, and overclocked pace of home price growth, Global News
TD economist Diana Petramala expressed puzzlement over the CMHC’s statements, however, considering that Canadians still have little to worry about at the moment. This is because the regulatory revisions governing mortgages will actually rein in house price growth to more manageable levels.
“We’ve always had embedded in our own forecasts a slowdown to more normal housing activity and we think these new mortgage regulation rules are the way we will get there,” Petramala said.
“To some degree, [the CMHC has] a bit more of an interest in potential downturns because they’ve insured a great deal of mortgages.”
The analyst added that TD’s prediction of a 10 per cent decline in Vancouver housing prices won’t adversely affect the national economy, as it will just be a “normalization” rather than the long-feared correction.
“It’s very odd to be coming out with a red reading now that the economy is doing well and market activity has slowed,” Petramala said.
“I think in particular though, CMHC’s research is mostly meant to help drive policy around housing and we’ve already seen the reaction from the federal government on Oct. 3. I think that for the most part this is going to be, ‘Yeah we knew this already and something’s been done.’”
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Amid the recent emergence of more “affordability pressures” in the wake of new federal mortgage regulations, the Canada Mortgage and Housing Corporation is set to release its first ever “red” warning for the national real estate sector, a development that points to the presence of problematic conditions in the market as a whole.