CMHC plays catch-up with vaguely alarming house price warning: Don Pittis
Will the government agency's voice be ignored like all the others?
Warnings about the Canadian property market are nothing new. International business publications and global banks have been calling it a bubble for years.
Now that the Crown corporation that insures residential mortgages, the Canada Mortgage and Housing Corporation, has added its voice with what turns out to be a mushy and moderate warning, will anybody listen?
Warnings in the past have been dire. Swiss bankers UBS have called Vancouver a bubble risk unmatched on the planet. The giant German institution Deutsche Bank said in January 2015 that the Canadian housing market was 63 per cent overvalued.
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The rich countries' think-tank, the OECD, has warned of the threat repeatedly. The Wall Street Journal and the Economist predicted a collapse before 2012.
Only last week, CMHC CEO Evan Siddall announced a "red warning" of his own in a commentary published in the Globe and Mail.
Although there were lots of red marks in the CMHC's assessment of the Canadian property market, the overall conclusion was as far away from a 63 per cent correction as you could imagine. In fact, it seemed to say that in most places the property market would continue to rise before going flat.
To many critics it might seem absurd that after property prices have been rising between eight and 25 per cent for years the CMHC is only now discovering overvaluations are in the "red" category.
As CMHC economist Dugan said in his conference call, predicting the effect of housing market risks is difficult.
"These risks include things such as uncertainty with respect to the future path of oil prices, upside and downside risks to U.S. and world growth," said Dugan.
What's the worst?
As you see above, the CMHC's thinking shows that even if oil prices crash or a booming U.S. economy sends interest rates into the stratosphere, the worst possible forecast for Canadian house prices is that they will continue to rise at about the same rate.
Anyone considering buying or selling should take a look at the two reports (see links posted on this page) in detail. They are not long, are clearly written and easy to digest.
If you take the CMHC analysis at face value, you should not expect to be scared out of the property market any more now than when I told you to be afraid in 2012. And if you laughed off Deutsche Bank's 63 per cent warning, maybe you'll be rushing out to up your stake in Canadian houses.
But there is another way to view the CMHC's report that was hinted at, though not explicitly stated, when my colleague CBC Business reporter Jacqueline Hansen phoned to squeeze in a question that had been cut off in the conference call.
It is that the CMHC seems to realize that, after years of being a property market booster, taking a sterner line on the future of Canadian houses will have an effect of its own, especially after its red alerts have been amplified through the media.
There is some danger that being overly gloomy could cause a bubble, if there is a bubble, to burst, driving the economy into a tailspin. Of course no one knows whether a delayed reaction to the latest round of government rules to slow the house market could still have that effect.
If so, we will be glad that the CMHC's change of tune, the soothing concession that house price increases could slow and maybe even stop, was not more frightening.
You just wonder why the CMHC couldn't bring itself to say it a few years ago before houses got so dangerously overvalued.
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