Canada’s National Housing Agency Thinks Prices Are Too Steep, Even With The Declines

The most influential housing organization in the country seems to be bearish on real estate prices. Canada Mortgage and Housing Corporation (CMHC), the Crown agency in charge of housing research, released its fourth quarter Housing Market Assessment. The government backed agency is seeing prices cool, but still feels the country is overpriced at the national level. They’re probably just jealous of your sweet, sweet condo – right?

The CMH-What?

The CMHC is the government agency that oversees housing research and mortgage liquidity. They are a non-partisan organization, that provides “unbiased” research. Focusing on fundamentals, and filtering hype is what they do. They’re pretty good at it as well, excluding that report on foreign buyers in Vancouver.

Every quarter they publish a report on how real estate fundamentals are looking. Note, the many times we’ve used the word fundamental. That means interest rates, disposable income, and price acceleration are used for conclusions. Your Realtor saying he saw a WeChat thread that looked exciting is not. They then publish a terror alert color graded warning system for real estate. Here’s what they had to say about the country’s largest markets.

Toronto Real Estate Is “Highly” Overvalued

Toronto real estate prices have fallen a little, but still remain “overvalued.” The MLS average house price, when adjusted for inflation and disposable income, decreased. The drop however, wasn’t enough to bring prices back to reality. Consequently, the agency has declared the market “highly” overvalued.

Vancouver Real Estate Is “Highly” Vulnerable

The CMHC isn’t super bullish on Vancouver real estate. They noted price growth “significantly” outpaced the growth of incomes. For this reason, they believe the market is highly vulnerable. The good news is they didn’t find any evidence of overbuilding. That conclusion comes after noting low vacancies, and a high rate of pre-sale. That might change next quarter, after they read yesterday’s report on pre-sale absorption.

Montreal Real Estate Is Just Right, But Heating Up Very Quickly

Montreal real estate shows that not all markets across Canada are overpriced. The agency found that prices are moving in-line with demographics and economic activity. Although the recent sharp increase in prices could present a problem in the near future. Despite the recent bump, they declared vulnerability low. Also worth noting Montreal’s prices had been lower than the national average over the past few years. The recent increases are likely making up for lost time.

Canada’s National Housing Agency Thinks Prices Are Too Steep, Even With The Declines - chart

The Crown Corp thinks Canadian real estate is highly overvalued at a national level. Price growth has started to come down as rates climb, restoring a little sanity. However, the easing isn’t enough to bring prices where they need to be to support a healthy market.

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  • Ewan 5 years ago

    It’s irresponsible for a Crown corporation to use the term “overvalued.” I’m writing my MP today to tell them the government has no place in evaluating how expensive homes should be, and you should do the same.

    • Investor 5 years ago

      You’re lucky if your MP doesn’t point out your naivety to you. Who should determine if real estate is overvalued – people with this same attitude you just displayed? These are checks and balances intended to curtail irrationality (like the one just displayed) that could burn down the whole house and bring down the economy when people are showing their exuberance. The government, in all fairness doesn’t care if you choose to burn down your own house.

    • SMH 5 years ago

      LOL don’t waste your key strokes.

    • Chuck 5 years ago

      Agreed. The Government is overstepping their boundaries again. The B-20 Guidelines were overkill during an already cooling market. Now they’re trying t

      We need to elect more Conservative MPs that will fight this nonsense.

      • Ham 5 years ago

        And the government wasn’t overstepping it’s boundaries when they introduced measures to prop up the housing markets? It’s incredible how people only see what they want to see…

        Consider the first time home buyer land transfer tax credit, cmhc backed insurance, bc’s down payment assistance, etc.

        And you are parroting mortgage brokers association, realestate boards, to pad their pockets more with their reckless dissemination of fearmongering nonsense at the cost of prudent tax payers who stand to lose when shit hits the fan.

        For those who have stretched themselves thin and continue to want to do so during the period of historically low interest rate (and at the end of the credit cycle) despite all the warnings and measures the government puts in to save them deserve to lose their shirt and be out on the streets.

        • notsure 5 years ago

          Presumably you are a renter, Ham. In any case, what about the family who just wants to own their own home to live in, and has saved for years watching prices go up, up, and up, for what seems like forever, in spite of everybody saying we are in a bubble for an equivalent amount of time with it never bursting. Suppose this family just decides to bite to bullet and leverage themselves into the market, and it just so happens that THIS time is actually WAS the top, and now people like you want to see them burn, and be punished, for what? And you support government intervention adding gasoline to the fire of prices that are already naturally cooling?

      • Bluetheimpala 5 years ago

        Oh chucky, I’m eating poutine and planning my move to my new house so I’m in a wicked mood. Don’t get political here. The housing mess has nothing to do with any party. If my cat understand this very simple concept, I’m surprised you’re so confused by it. Then again, you’re reading the calgary sun…lol…tick tock. BD4L.

      • Brad 5 years ago

        So Chuck thinks that B-20 put in by OSFI, an independent body, is the government overstepping and changing a market… but when the government slashed rates to nothing in order to overstep and change a market it was perfectly fine… wow lol

    • Asterix1 5 years ago

      I’m also going to write to my MP and tell him to…..

      1. Get rid entirely of CMHC, let banks take all the risk! That should smash sales!
      2. To start a campaign to let everyone know that B20 came from OSFI, an INDEPENDENT agency of the Government of Canada.
      3. Remind citizens that rates are going up and up and up. Government does not care that you are full of debt. We follow USA like clockwork..
      4a. Start suing Remax/Royal/TREB/CREA for their false and manipulative “market reports”
      4b. Start suing TStar, TSun, NPost, G&M and all MSM for publishing RE industry lies!

      • Enough of this... 5 years ago

        AMEN BROTHER!!!

      • Ham 5 years ago

        Amen to this. Those “free market” proponents that fail to see how the market is anything but free but propped up to no end but whine about the measures that somewhat balances out this are delusional.

      • Enough of this.. 5 years ago


      • Bluetheimpala 5 years ago

        Word is born. BD4L.

    • CNL 5 years ago

      How expensive homes could be, or should be, would affect the quality of life of the general public. If the government does not do any evaluation, or anything in this area, it may mean that the government would have no guideline, of its own, to have any measurement, or to have any impacts, that may help to improve, or maintain, the quality of life of the general public in the housing area. For the interest of the general public, should we ask the government, or CHMC, to do more rather than less? Of course, not everyone may all agree with the result generated, or action carried, by CHMC and/or the government. Then, I would be interested to hear the rationale of the disagreement. For example, going back to their study, who think the current housing value in places like Toronto is not “overvalued” when the fundamentals are considered ? Or perhaps, the fundamentals should not be considered at all? If so, what factors should be considered? Following this flow of thoughts, perhaps, write to your MP to tell the government what you would like to include in any future housing study, or policy change. This may be more helpful for the benefit of the general public, which should be the interest of our government.

    • Ham 5 years ago

      It’s the responsibility of the Crown corporation that insures YOUR mortgage for YOU so that YOU can “afford” more expensive realestate to track the market conditions on how likely YOU are likely to default so that they can be prepared to pay up tax payers’ money to cover for YOUR delinquent debt.

      Clear? Let’s get rid of CMHC.

    • Mtl Matt 5 years ago

      I’m writing to my MP to tell him that the central bank should remain apolitical and must be focused on their single mandate of keeping interest rates at 2% and need to keep adjusting the rates to respect this mandate, regardless of sob stories from people that can only afford their mortgage at 3% interest rates.

    • Bluetheimpala 5 years ago

      You clearly don’t understand enough about the subject matter to comment. But please, continue telling your friends it is the feds. Will usher in our darkest days even quicker…where’s stevie hiding? And if you’ve seen my comments I’m no Baby J fan, he’s a douchnozzle but misplaced anger breeds ignorance. Just look at the americans. Buuut…it’s friizzzday bitch time to get sloppy. Tick tock.BD4L.

  • Quan 5 years ago

    You tools that keep saying real estate bears are just being negative are tools, and need to stop talking. Legally, real estate agents can’t tell you where prices are going, and they should be reported for doing so.

  • Investor 5 years ago

    Human beings, by nature, are generally irrational. How can salesmen decorated as realtors coerce thousands of buyers into thinking it’s okay to get into bidding war?? How did they ever think they’ll get ahead? Of course, some come out of it victorious by sheer luck, but majority get burnt badly.

    • Trevor 5 years ago

      Zero regulation is why we have so many shills migrating to Canada. You couldn’t pull this garbage in the US.

    • vnm 5 years ago

      So true. It’s a game of musical chairs with a few chairs and a million players.

  • SUMSKILLZ 5 years ago

    It’s quite shocking that new listings in York region, are still using 2017 prices. At least that is what I see in Aurora.

    • PriceIsntRight 5 years ago

      Detached prices have stalled overall, down in real terms yearly, except for 5 bedroom, which are up 32% over the year. That’s a balanced market?

  • vnm 5 years ago

    Pretty much says it all. When the U.S. tanked in 2008, we stayed mostly out of it by cutting rates, which isn’t an option this time around.
    As has been wisely stated on this site once or twice: “tick tock”, and “buckle up”.
    CNN ” … markets are starting to price in slower economic and profit growth as the bull market and business cycle age. The stimulus from tax cuts will eventually fade and the Federal Reserve’s interest rate hikes may also slow growth.”

  • Rick Abrams 5 years ago

    One of the most important domestic functions any government plays is to protect the Price System, Canadians are lucky that its government is doing this to some extent as opposed to the US where the government continually lies about everything.

    The New Urbanism always overprices urban land, but people seldom realize that they’ve allowed developers to construct BEYOND BUILD-OUT in urban cores until it is really too late. So Canada will “suffer” some what from a government correction, but that is far, far better than another Crash.

    Canada’s and Australia’s basic problem is the New Urbanism which calls for concentrating density in an urban core and the relying on mass transit. It is a formula for disaster. Density increase land prices which increases housing costs and fixed rail transit is horribly expensive to built, to maintain, and then requires virtual replace within 30 years. People hate it — as soon as they have a better option. Self-driving electric cars, Uber, and Virtual Presence are all better options. in the USA, More people chose working at home using VP than ride mass transit.

    Mass transit can financially burden urban areas. It varies according to the financing between cities, towns and counties in the USA and the differing jurisdictions in Canada. To the extent the urban core government gets stuck with the extra bonds and/or taxes, it will find itself burdened with financial obligations which urban dwellers will dislike and will cause more families to mover outside the high-cost financial zone.

  • @xelan_gta 5 years ago

    Population growth is one of the major points among the bulls.
    Here is a great analysis regarding this topic which shows that population surge in Ontario is a temporary fenomen caused by both interprovincial and international migration (not even immigration) mostly because of our housing boom.

    That behavior is completely expected for RE bubbles and in the comments Steve provided examples of other countries where those trends completely reversed when the boom was over.

    Housing shortage in GTA is a direct result of this temporary fenomen.

  • SUMSKILLZ 5 years ago

    Realtor rings my bell. Sadly I answer because I was expecting a Kijijiji customer. Realtor says, “there is only one home for sale on your street…if you list, they’ll have competition and you’ll both make more money.” I laugh, and say “don’t worry, they’ll have competition soon enough”, and close the door.

    He rings again. He says, “I’m confused, are you going to discuss with your family and call me? or do you already have a realtor?” I say, “no and no” and wish him a good night.

    • Beh G. 5 years ago

      Sums up the level of knowledge of RE agents in Toronto: competition is good for sellers not buyers – put another way, higher supply means higher prices!!!

      This is while they’ve been arguing at the same time that there´s too much demand and not enough supply that´s why prices were going up. Now that there´s a supply glut and demand has tapered off, apparently more supply will raise prices!!!

      Honestly, if I had a penny for every ridiculous statement I heard from a T.O. RE agent, I would have theoretically retired 6 months earlier, although in reality I’d still be holding on to my overpriced property and stressing that I had lost $300-$400k since March 2017 instead of getting in early and riding the next RE bubble that´s going to burst 5-7 years from now in Spain, mortgage free and enjoying 320 days of sunshine… so as Blue says tick tock… 😉

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