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Housing-market risk jumps to high in Canada government rating

Canada’s housing agency said the country is now at high risk of a sharp correction in home valuations as the continued appreciation in prices becomes unmoored from economic fundamentals.

The Canada Mortgage and Housing Corp. raised its market risk assessment to high from moderate on Tuesday, in a report showing both activity and prices remain near record levels reached earlier this year amid rock-bottom mortgage rates and a frenzy for bigger living spaces driven by the COVID-19 pandemic.

Though Canada has seen a rising vaccination rate and an improving economy since then, the strength in the housing market is still far beyond what’s warranted by these developments, with prices further detached from labor incomes, the agency said.

“We’re seeing price acceleration, over-valuation, and it’s increasing the vulnerabilities for Canada,” Bob Dugan, CMHC’s chief economist, said on a conference call with reporters. “Hopefully we don’t see a large fall in house prices.”

On top of the shift in the national outlook, the agency raised its risk assessment of Montreal’s housing market to high from moderate, bringing the number of Canada’s major cities deemed most at risk to six. Vancouver was a notable exception, seeing its risk assessment fall to low from moderate on an increase of homes on the market that’s caused price growth to settle down…read more.

Homes listed for sale in Metro Vancouver have fallen to lows not seen since 2016

VANCOUVER — The Real Estate Board of Greater Vancouver says home sales have plateaued after reaching record highs in March.

In its third-quarter housing overview for 2021, it said the number of homes listed for sale in Metro Vancouver has fallen to lows not seen since 2016.

The increasing correlation between sales and new listings over the pandemic is consistent with more buyers selling their homes and purchasing other, typically larger ones, it said. First-time homebuyers or those who moved into bigger houses made up a large proportion of house sales, it said.

Andy Yan, director of the City Program at Simon Fraser University, said the earlier rise in sales could be attributed to seasonality where home sales see a surge in the summer as well as people spending the money they had saved up during the pandemic on buying a house…read more.

Canada’s Real Estate Bubble Is The Second Longest In The World: US Federal Reserve

Canadian real estate has long been frothy, but how does it look compared to other countries? According to the US Federal Reserve (the Fed) exuberance index in Q1 2021, pretty bad. Only two G7 countries are considered exuberant markets (a.k.a. bubbles) — Canada and Germany. Those two countries are also the longest-running bubbles of any advanced economy. The longer a market remains exuberant, the greater the drag on quality of life and the economy. They also tend to require much larger corrections, with greater economic fallout.

Exuberance Index

We just took a dive into the exuberance index last week, so we’re only going over what you need to know. The Fed tracks global housing markets for exuberance, looking to identify bubbles. In this case, exuberance means explosive price growth beyond market fundamentals. When this happens, people are buying based on the excitement of paying more, or fear of being locked out. Whatever the reason, it’s an emotional one. By tracking this, they hope to prevent a 2006-like event from happening again.

One or two quarters isn’t a trend — it happens. The problem is when exuberance becomes persistent, without any correction. Fed researchers say five quarters of exuberance is when the market is exuberant. An exuberant market is better known as a bubble, and bigger corrections are needed to fix them…read more.

How a foreign homebuyer ban in Canada could backfire

Anyone looking to purchase property in Canada who is not a citizen or permanent resident of this country may not have much time left.

After Canadians go to the polls on September 20, some potential homebuyers may have to wait to buy a property in Canada as both the governing Liberals and opposition Conservatives have pledged to ban foreign buyers from purchasing residential homes in Canada for at least the next two years.

The proposals build upon provincial taxes imposed on foreign homebuyers in the hottest housing markets of British Columbia and Ontario in 2016 and 2017, respectively. While experts have long debated whether those policies have helped address the housing affordability crisis that has since spread beyond the confines of the Vancouver and Toronto regions, one prominent policy director warns a federally-imposed ban could backfire…read more.

Former Walmart Exec Unveils Plan To Build A ‘New City In America’

A ‘new city in America’, set to house five million people, is being planned by a former executive of Walmart.

Last week, Marc Lore, former head of US e-commerce for Walmart, unveiled plans for the new city, appointing a world-famous architect to design it. The billionaire called the plan for the sustainable metropolis, ‘Telosa’.

He hopes to raise $400 billion in funding to create the project from scratch in an American desert, ‘creating a more equitable and sustainable future’…read more.