CMHC says Toronto housing market at ‘high risk' of price correction

[Chad U.]

At long last, the monopolistic mortgage backer Canadian Mortgage & Housing Corp finally warns that the Toronto market is overpriced due to income growth not keeping up with soaring house prices.  

Interestingly enough, they feel that Vancouver is a low risk as the top 20% of highest priced houses skews the $1.4M average and if stripped out, this average drops to $550K. They also note that constraints on buildable land and the income growth supports these prices.  

What effect do you think this will have on general buying mentality in the Toronto area?  Do you think this warning will have a cooling effect on the Toronto market and other parts of Canada?

http://business.financialpost.com/personal-finance...

http://www.theglobeandmail.com/report-on-business/...

[Roy N.]

@Chad U.

This is the problem when politicians want to manipulate crown corporations for their own electoral ends.   The Minister of Finance (or rather the last one) was responsible in part for the current mess by reducing the underwriting requirements for a owner occupied mortgage ... this allowed the lenders (Big-5) to offer 30yr amortizations with zero down (after cash back) mortgages to folks who should not have qualified for the size of mortgage they were trying to place.   The tightening of the mortgage regulations in 2012/2013, of which the Minister liked to boast, was no more than a return to what existed before the government relaxed things.

CMHC is close to fully subscribed - and this is after an increase in their limits for which the lenders lobbied, so they will soon have to start refusing to underwrite some deals.  The lenders, on the other hand, won't tighten their underwriting practices because they simply insure everything they can through CMHC and Genworth and do not carry the risk.  Genworth is tightening up on what they will underwrite (and the never did high-ratio below 10%-15%) as they are a business.  This leaves the rest in the hands and pockets of the tax payer.

Someone has to pull the break lever.