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Vancouver housing market still hot, but a cooldown expected: CMHC report

Last Updated Oct 26, 2016 at 4:09 pm PST

(Photo by Dustin Godfrey for NEWS 1130)

The rating has been upgraded to strong from moderate in July

The agency finds home prices are climbing faster than income and population

VANCOUVER (NEWS 1130) – Canada’s housing agency is issuing a red alert for the real estate situation across the country.

The Canada Mortgage and Housing Corporation says most markets across the country are overvalued. This report adds Hamilton to the list along with Vancouver, Toronto, Calgary, Regina and Saskatoon in the “red” category.

Focusing on Vancouver, CMHC says there was “moderate evidence of overheating” “While the sales-to-new listings ratio eased back below its threshold in the second quarter, further evidence of balancing in the market is necessary to confirm conditions are normalizing.”

The report shows that things have cooled off from the beginning of the year, but Robyn Adamache with the CMHC says there is are still signs of overvaluation, price acceleration, and an overheated market.

“It’s a little early at this point to be able to tell the impacts of, for example, the mortgage insurance rule changes.”

She expects home prices to continue to grow, but at much slower pace.

“Clearly sales early in the year were at unsustainable levels and now they are starting to move back to long-term norm.” And the forecast for the next two years could mean a cooled down market. “We are expecting to see both sales and housing starts to trend back towards the long-term average level,” she says. “Home prices as of July, actually saw the first year over year decline in average home prices, however, the benchmark prices are holding steady.”

CMHC is also predicting that home sales and the pace of new housing starts will decline next year before stabilizing in 2018. The agency’s CEO Evan Siddall said earlier this month the housing agency would raise its risk rating to strong for the first time ever.

The CMHC report covers the April-to-June quarter, thus not capturing the slowdown in July or the sudden drop-off in sales after BC’s tax on foreign homebuyers in Metro Vancouver. The agency says “A continued decline in sales coupled with the continuing trend of increasing listings should lead to growing inventory and more balanced sales-to-listings ratios that will moderate price growth.”

The 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. It covers 15 regional markets and the national housing market as a whole.