CIBC World Markets has just released a report calling Canadian home prices ‘overvalued’ and forecasting falling prices:
CIBC World Markets economist Benjamin Tal said Tuesday that prices could decline by as much as 10 per cent in the next two years, but that a “violent” correction similar to the one seen in the United States remains unlikely.
“We are more likely to see higher interest rates causing a modest decline in prices,” he said. “Because we lack the driver for a more violent decline, we should expect a more orderly rebalancing.”
That’s in the nation as a whole, where median price to income ratios in the five largest cities combined have reached 5.62 (the US market peaked at 5). Here in Vancouver we’re currently running at a ratio higher than 9, similar to where Miami was in 2006.
Last week, TD Bank issued a report that suggested prices could fall by 2.7 per cent in 2011. The Canadian Real Estate Association expects to see a decline of 1.5 per cent. Among recent forecasts, only the Canada Mortgage and Housing Corp. calls for higher prices in 2011, with an anticipated gain of 1.3 per cent.
..of course the Canada Mortgage and Housing Corp. is the one pumping government money into the housing market. They’ve gone from $138 billion securitized in 2007 and jacked that up by more than double in just a few short years with close to $500 billion in Canadian mortgages securitized today. Do they have the power to make their contrary prediction come true?
