CMHC Says Market at Risk of a Downturn in Around Town
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In its latest housing market assessment, Canada Mortgage and Housing Corp. identified price acceleration as a problem nationwide.
The report states that exceptionally strong demand and home price appreciation over the course of the pandemic may have contributed to irrational expectations of continued price growth and, in turn, more buyers entering the market than was warranted.
Observed house price growth significantly outpaced growth in house prices supported by fundamentals between the fourth quarter of 2020 and the second quarter of 2021. This resulted in a widening of Canada’s average overvaluation gap.
The sales-to-new listings ratio (SNLR) in Canada reached a historic high of 84.1% in the first quarter. In the second quarter, as the pace of sales slowed, the SNLR moderated to 73.5%.
Despite the moderation in the second quarter, both data points for the SNLR remained above the critical threshold set to signal overheating.
Price acceleration is now detected at the national level. The indicators for the inflation-adjusted Teranet-National Bank House Price indexTM and the CMHC Repeat Price Index exceeded the critical threshold set for price acceleration by the second quarter of 2021. This was due to a sustained upward trend in the growth rates of these price measures.
In the more expensive parts of B.C., the typical price of a single-family house has jumped by at least $100,000 in six months. That includes Vancouver Island, Victoria, and the lower mainland, according to Canadian Real Estate Association’s data. Interestly, the report said Victoria had only a moderate level of risk as severe price increases have not yet overvalued the market.
For the full report see the Canada Mortgage and Housing Corporation.
Excerpts from Globe and Mail Report on Business
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