Canada’s Housing Agency Abruptly Halted Its Public Real Estate Warning System

Canadian real estate is entering one of its most precarious phases in history. Households will navigate it without the help of the national housing agency, though. The Canada Mortgage and Housing Corporation (CMHC) has halted its Housing Market Assessment (HMA) report. The regular report provided the public with insights on housing market imbalances. The cancellation comes after last reporting Canadian real estate is highly vulnerable, and the central bank begins its tightening cycle. The latter is expected to cool this bubble, which creates a bit of a pickle for the former.

Canada’s Last Housing Market Assessment Showed The Country Was Highly Vulnerable

The HMA was Canada’s national housing agency’s risk guide for consumers and industry on housing. In their own words, “The HMA identifies significant imbalances in the housing market that could potentially increase the risk and consequences of a housing market downturn.”

In plain English, the HMA identified metrics that would present a risk to real estate markets. Overvaluation, overbuilding, and too rapid price growth are amongst the indicators. These factors would then determine the degree of imbalances that exist on a 3-point scale. Markets are ranked by a degree of vulnerability — high, moderate, or low. It was like the US color-coded Terror Warning, but for real estate and mortgages. 

Here’s the summary chart for the last HMA they released.

Source: CMHC.

The last report in September 2021 showed Canadian real estate was highly vulnerable. Not one or two markets, but they assessed the national real estate market at this level. Six other markets were also considered highly vulnerable. An additional three cities showed a moderate degree of vulnerability. Only five out of the fourteen markets presented few warnings. Over two-thirds of markets were setting off alarm bells. This report was also written before the absurd gains made in 2022, and price growth was 10 points lower. 

No More Vulnerable Market Guidance In Canada

Many wondered when the next report would drop, considering how out of whack the market is. It turns out on March 8, 2022, the agency quietly put up a notice canceling future updates. There was no, “hey, this will be the last report.” Just a small notice, including the following statement.

“We’re refocusing our resources to get a better understanding of housing supply and affordability issues across Canada. We’ll continue to closely monitor the health of Canadian housing markets and update Canadians through existing publications.”

Canada Worked To Ensure The Previous Warning Would Be Wrong

The CMHC guidance at the beginning of the outbreak has been ridiculed by the industry. They warned home prices would fall 20% back in 2020, and caused a bit of a panic… amongst policymakers. As a result, the BoC and Federal government worked overtime to send prices higher. Various forms of stimulus were rolled out to stop price drops, and some of that stimulus still remains.

Even when the media became skeptical, and asked what the heck was happening, it was justified. “We need the growth we can get…,” the BoC Governor told the media. It was followed by even more stimulus, until homes outperformed employment for most. They then acted perplexed by the results, and the CMHC looked like it just didn’t know what it was doing. 

That was the old CMHC though, and the agency is now under new leadership. Leadership that openly explained they need to focus on growing market share. This came at the expense of the previous leadership’s attempt to protect borrowers. Maybe a national housing agency that is also in the mortgage business isn’t a great idea?

On one hand, it’s their responsibility to inform the public of housing market risks. Their other responsibility — increasing the number of high leverage borrowers. Kind of hard to do if you keep scaring mortgage borrowers with all of your risk reports, right? It’s an issue for another day, though. Back to the end of the HMA.

A few days before they announced halting the HMA, the central bank began raising rates. The stimulus that was introduced, and helped send prices soaring, is being removed. The response from Canada’s national housing agency? It might as well have been, “GLTYA, some of you are NGMI.”