Canada Mortgage and Housing Corporation (CMHC) says there is mounting evidence that house prices in a number of Canadian cities are out of whack with incomes and other economic fundamentals. The latest report from CMHC says there is evidence of overvaluation and overbuilding in Saskatoon.
“Overall, we detect strong evidence of problematic conditions. Downward revisions to population data for recent quarters contributed to the shift from moderate to strong evidence of overvaluation,” said Goodson Mwale, the CMHC’s senior market analyst for Saskatchewan.
“The framework also continued to detect strong evidence of overbuilding.”
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According to the report, despite a 35 per cent decline in year-over-year housing starts in the city, the current inventory of new homes on the market along with an increased vacancy rate for rental units supports the CMHC’s finding of overbuilding.
CMHC also found that despite a downward pressure on housing prices due to an economic slowdown and higher unemployment rates, overvaluation is happening in the market.
Overvaluation occurs when home prices are so high that they are not fully supported by economic fundamentals such as family incomes, mortgage rates and population growth.
The report indicated that the imbalance could be resolved with either a slowdown in price growth, an improved economic outlook, or a combination of both.
With files from The Canadian Press
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