First National Financial LP

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Original perspectives and personal viewpoints on developments and industry trends.

Residential Mortgage Quarterly Review - Q2 2019

  • First National Financial LP

For the second quarter in a row Canada Mortgage and Housing Corporation has pegged overall vulnerability in the country’s housing market at moderate.  It had stubbornly persisted at high for 10 consecutive quarters, before edging down in Q1.

Big markets still drawing attention

Vancouver, Victoria and the Greater Toronto Area continue to get the most attention.  This time though, Vancouver gets some credit as a moderating force, because of slowing price acceleration.  That factor is now deemed to be a low risk, dropping Vancouver’s overall rating to moderate, after being ranked a high for 12 straight quarters.

Victoria, Toronto and Hamilton remain problematic for the housing agency, maintaining their overall high risk ratings.  However, CMHC says overheating, price acceleration and overvaluation are showing signs of easing in all three centres.

Montreal retains its low vulnerability rating but concerns persist about overheating.

Overbuilding is deemed a moderate risk in Edmonton, Calgary, Saskatoon and Winnipeg, with Regina ranked as high.  Overall, all five markets are ranked as having moderate vulnerabilities.

Realtors looking for a recovery

The Canadian Real Estate Association is looking forward to a housing market recovery as the year progresses.  It is pegging that hope on strong market fundamentals, the increase in the RSP home-buying withdrawal limit and on the up-coming “shared equity” program that was outlined in the last federal budget.  It is due to take effect in September.

However, the higher interest rates in its latest forecast seem unlikely to materialize.  The Bank of Canada has dropped its mortgage qualifying rate from 5.34% to 5.19%, and has made it clear there will be no changes to its trendsetting policy rate.

Sales projection turnaround

CREA’s optimism has led to a turn-around in its sales projections for 2019.  The Association is now forecasting a 1.2% increase.  Previously, it had been forecasting a 1.6% decline.  Sales growth is forecast at 4.4% for 2020.  CREA continues to point to the B-20 borrowing restrictions as a key limiter of sales growth. 

The realtors expect to see home prices drift lower by about 0.6%, to $485,000, nationally.  But there will a distinct east – west divide; rising prices in the east where demand remains high and falling in the west.

CREA hopes to see prices rebound by about 0.9%, to $490,000, for 2020.