Investing in the busy real estate market of southern Vancouver Island and surrounding areas. New listings and sold signs can be seen around Victoria, B.C., on June 1, 2018. THE CANADIAN PRESS/Chad Hipolito

Housing market ‘moderately’ vulnerable amid potential overvaluation of homes: CMHC

CMHC says there was a ‘moderate degree of vulnerability’ in the housing market as of the end of June

Canada’s housing market experienced overvaluation in some pockets of the country in the spring amid the COVID-19 pandemic, Canada Mortgage and Housing Corp. said in a new report released on Monday.

In cities such as Victoria, Moncton and Halifax, there was a widening gap between the selling price of houses and the price economists would expect, based on population growth, disposable income, mortgage rates and employment, the Crown corporation said.

That data comes from the agency’s housing market assessment, which gives the housing market a grade based on whether homebuilding and rising prices could ultimately affect the stability of the economy. The report doesn’t look at whether homes are affordable — but does try to inform homebuyers and lenders on what would happen to the equity in their homes if a sudden economic shock led to a spike in unemployment, for instance.

CMHC says there was a “moderate degree of vulnerability” in the housing market as of the end of June, the same grade the market received in February.

The preliminary report shows the slowdown during the height of COVID-19 lockdown measures, but doesn’t include the record-setting sales in July and August — nor does the data reflect the ending of government income supports and mortgage payment deferrals.

Because the report’s analysis of home price overvaluation relies heavily on analyzing Canadians’ income, the authors suggested that the risk might be underestimated.

“The unprecedented income supports from Canadian governments to households (such as the Canada Emergency Response Benefit and the Employment Insurance Benefits) provide relief to individuals experiencing financial hardship due to the COVID-19 crisis. These sources of income are, however, temporary,” said the report.

CMHC economist Bob Dugan said that — despite giving the housing market a steady grade this summer — CMHC still expects a severe decline in home sales and in new construction to come as the economy recovers from the pandemic.

“I don’t think we are out of the woods yet. I certainly hope our forecast is wrong,” said Dugan in a phone call with reporters.

In May and June, CHMC had given a grim outlook for the housing sector, including a steep decline in housing prices. Although realtors have reported record-high home sales and prices in July and August, Dugan said he is not convinced that there is a “sustainable basis” for the current homebuying demand.

“I’m not confident yet in walking away from some of our predictions, given the tremendous amount of risk to the economy and housing market,” Dugan said.

While Canada’s housing market as a whole does not show signs of overheating, outsized price acceleration or overbuilding, some regions do pose moderate risks, the report said.

Winnipeg, Edmonton and Calgary are areas where there is “moderate” risk of overbuilding, CMHC said, looking at both second-quarter data and monthly inventories from July and August.

In Edmonton, there has been increased construction of detached homes despite weak employment in the oil sector, while in Winnipeg, incoming migration has slowed, CMHC analysts said. Calgary, meanwhile, has seen row houses and townhomes sit empty as cost-conscious buyers opt for condos instead — leaving the city approaching its 2001 record-high of empty new builds.

The report also gave Canada a “low” risk of price acceleration, but noted that prices are rising moderately more quickly in Ottawa and Montreal. In Montreal, the supply of homes for sale was at a 16-year low, pushing prices closer to “problematic” levels.

The Ottawa and Montreal housing markets are also at a moderately higher risk of overheating, as are Hamilton, Ont., Quebec City and Moncton, CMHC said. Overheating happens when there is more demand to buy homes than there are listings.

“The high economic uncertainty and temporary public health and workplace safety restrictions placed on property showings caused a greater number of sellers to exit the market than buyers,” the report noted.

Anita Balakrishnan, The Canadian Press

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

Real estate

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

test tube with the blood test is on the table next to the documents. Positive test for coronavirus covid-19. The concept of fighting a dangerous Chinese disease.
Interior Health records third COVID-19 death

A new community outbreak was reported at Okanagan Men’s Centre in Lake Country

The Spences Bridge Improvement District is looking for someone to fill the position of fire chief, and is also looking for people willing to stand as a candidate for the SBID board; elections will take place at the AGM on Nov. 28. (Photo credit: Barbara Roden)
Candidates for trustee, fire chief wanted in Spences Bridge

Elections will be held during Spences Bridge Improvement District AGM on Nov. 28

Looking west from the Mesa to the Ashcroft Reserve at the start of the Elephant Hill wildfire, July 7, 2017. Students at Desert Sands Community School are looking to interview locals about their direct experience with the 2017 wildfires. (Photo credit: Barbara Roden)
Students looking for people to share their 2017 wildfire stories

Desert Sands Community School students want to speak with residents about wildfire experiences

BC 2020 election graphic
Elections BC estimates 52% of BC voters cast a ballot this year

Results are down from 2017, and final counts will have to wait until mail-in ballots are tallied

An operator works to clear the culvert at Quartz Road in Cache Creek during flooding in April 2020. The Village of Cache Creek is looking for local contractors who want to go on a list for any work (emergency and non-emergency) that is needed. (Photo credit: Barbara Roden)
Village of Cache Creek calling all contractors willing to work

Plus a Halloween drive-in movie event, an AGM, Christmas market news, and more

A woman wears a face mask and plastic gloves while browsing books as a sticker on the floor indicates a one-way direction of travel between shelves of books at the Vancouver Public Library’s central branch, after it and four other branches reopened with limited services, in Vancouver, on Tuesday, July 14, 2020. (THE CANADIAN PRESS/Darryl Dyck)
B.C. reports 234 new COVID cases, 1 death of senior who had attended small birthday party

Roughly 5,700 people are isolating due to being exposed to a confirmed case

A nurse performs a test on a patient at a drive-in COVID-19 clinic in Montreal, on Wednesday, October 21, 2020. THE CANADIAN PRESS/Paul Chiasson
Interior Health reports seven more COVID-19 cases

Eighty-nine cases remain active, none of whom are currently hospitalized

Burnaby RCMP responded to a dine-and-dash suspect who fell through a ceiling in March 2020. (RCMP handout)
VIDEO: Suspected dine-and-dasher falls through ceiling of Burnaby restaurant

A woman believed to be dashing on her restaurant bill fell through the kitchen ceiling

A can of Canada Dry Ginger Ale is shown in Toronto on Thursday Oct. 29, 2020. The maker of Canada Dry Ginger Ale has agreed to pay over $200,000 to settle a class-action lawsuit launched by a B.C. man who alleged he was misled by marketing suggesting the soda had medicinal benefits. THE CANADIAN PRESS/Joseph O’Connal
B.C. man’s lawsuit over marketing of Canada Dry ginger ale settled for $200K

Soda’s maker, Canada Dry Mott’s Inc., denied the allegations and any liability

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Vancouver Island-based Wilson’s Transportation has expanded to fill some of the routes left unserviced by Greyhound as of Nov. 1, 2018. (Black Press files)
B.C. bus companies say they need help to survive COVID-19

Like airlines, motor coaches have lost most of their revenue

A deer was spotted in October 2020 in Prince Rupert, B.C., with a bright pink yoga ball stuck in its antlers. (Kayla Vickers/Chronicles Of Hammy The Deer Official Page)
Hammy 2.0? Prince Rupert deer spotted with bright pink yoga ball stuck in antlers

The BC Conservation Officer Service is aware of the deer roaming around the city

RCMP. (Phil McLachlan - Black Press Media)
Kelowna Mountie hit with 2nd lawsuit in 2 months for alleged assault

Const. Julius Prommer is accused of breaking a woman’s knee during while responding to a noise complaint

Hirdeypal Batth, 24, has been charged with sexual assault and forcible confinement in relation to an incident in August 2020. (VPD handout)
Man, 24, charged with sex assault after allegedly posing as Uber driver in Vancouver

Investigators believe there could be more victims outside of the Vancouver area

Most Read