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CMHC adds Calgary housing market to list of cities with ‘problematic conditions’

Canada Mortgage and Housing Corp. will tell you the housing market has what it calls “problematic conditions,” but one word the federal agency doesn’t like to use is “correction.”

The Crown corporation released its quarterly House Market Assessment report Wednesday, saying that, based on an overall assessment of local market conditions, four Canadian cities have “strong evidence” of problematic conditions. Predictions about what happens next in any of these markets are hard to come by.

“What we mean by ‘problematic conditions’ is there are imbalances in the market,” said Bob Dugan, chief economist with CMHC.

There are four factors CMHC considers before saying a city’s housing market is in trouble and flashing red, the corporation’s worst mark: demand outpacing supply; prices going up too quickly (perhaps because of speculation); values not supported by fundamentals based on income, Mortgage Rates and population; and overbuilding in a market.

Even if a city flashes red in all four categories — guaranteeing an overall red score — it doesn’t mean markets are going to crash any time soon.

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“This isn’t a predictive tool,” said Dugan, during a call with journalists to discuss the findings. “The fact we have evidence of problematic conditions doesn’t mean a correction is imminent.”

That statement should provide comfort for the four cities flashing red: Saskatoon, Regina, Toronto and Calgary — the latter having being added to the list after only having yellow, or moderate, risk in the fourth quarter of 2015.

Dugan said the report is more or less “an early warning system” for the market.

Resource By:- http://business.financialpost.com/personal-finance/mortgages-real-estate/cmhc-adds-calgary-housing-market-to-list-of-cities-with-problematic-conditions

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