Mortgage brief.. CMHC ‘red warning’.. what’s it mean?

Much has been made about CMHC’s Economists ‘Red Warning’ that was put out for the 4th quarter of 2016.  Let’s take a look at what the report actually says.

CMHC’s economists have 3 categories of measurement that are of concern.  Overheating, Price acceleration and Overvaluation.

VANCOUVER AND TORONTO

The Vancouver market had already been identified by CMHC as having moderate Overheating and Price Acceleration and Strong Overvaluation.    Toronto now has the same issues with the same Overall Assessment of Strong evidence of problematic conditions.

Put another way, CMHC believes the Toronto and Vancouver housing markets are vulnerable.   While this is cause for concern, there was also some other info in the report that we should be probably not overlook…

FEWER HOMES FOR SALE.   This has been and IS a big factor to watch.  The ratio of sales to new listings is 75%.  That’s incredibly high.   It means that the supply of homes is not rising, but decreasing.  The ratio has only been this high 3 other times in the last 25 years.

And for the first in many years, the condo market is even tighter than single detached homes.  That’s due, in part, to the low housing inventories.

An interesting read.  Definitely a sellers market still.  The record low interest rates are sure to keep activity robust.  We may not see the same level of price appreciation next year… but… you never know?   We’ve been hearing about a bubble for 9+ years now.  All the govt intervention has not slowed the market…or has it?    Perhaps the market could have become even more overheated?

Food for thought..

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca