Among the most prevalent problems is overvaluation – when house prices outpace economic fundamentals such as income and employment.
“There seems to be a fanning out of those price pressures,” CMHC’s chief economist Bob Dugan told reporters during a conference call Thursday.
“Homebuyers in these centers should be prudent to ensure that their purchases are aligned with their needs, as well as the long-term market outlook.” At Client First Mortgage Solutions we pride ourselves on helping our clients find the right options that best fit their needs. Filling out our online-application is a great place to start. We can help you make the best decisions possible so that you can achieve your financial goals.
Price Acceleration
CMHC has also found evidence of price acceleration in Toronto and Vancouver spreading to a number of other areas that aren’t covered by the housing market assessment, such as Barrie, Ont., Oshwa, Ont., and Kelowna, B.C.
The housing agency says the most prevalent issues it has observed in the 15 markets monitored by the assessment are overbuilding and overvaluation, which occurs when house prices outpace economic fundamentals such as income and population growth.
Overbuilding
Overbuilding is identified when the rental market vacancy rate or the number of newly built homes sitting on the market unsold become elevated.
CMHC first raised its overall risk rating for the national housing market to strong from moderate last October, citing growing evidence of overvaluation.
Since October’s report, CMHC has upgraded the risk rating for Victoria to strong from weak, as moderate evidence of overvaluation in the market has surfaced.
Problematic Conditions
In total, CMHC says it has found strong evidence of problematic conditions in six of the 15 markets included in the report: Vancouver, Victoria, Saskatoon, Regina, Toronto and Hamilton.
CMHC’s housing market assessment is intended to be an early warning system to alert Canadians about problematic conditions developing in the country’s real estate markets.
How will the Stress Test Change Things?
Since last October, the federal government has introduced new rules that require all insured mortgages to undergo a stress test to determine whether borrowers will still be able to make mortgage payments if interest rates rise or their income declines.
CMHC says it will take some time before the impact of the rule change is reflected in the housing market assessment.
