Home builders, realtors concerned about CMHC housing market report

Regina Leader Post, May 4, 2016 - A recent report by Canada Mortgage and Housing Corp. suggesting that housing markets in Regina and Saskatoon are more “problematic” than Vancouver’s has Saskatchewan realtors and home builders questioning the methodology behind the report.

The CMHC’s housing market assessment (HMA) report released last week determined that both Regina and Saskatoon, along with Toronto and Calgary, showed “strong evidence of problematic conditions.”

Both Saskatchewan cities were seen as having “strong evidence of overbuilding,” while Saskatoon was also seen as having “strong evidence of overvaluation,” CMHC said.

By contrast, Vancouver and Toronto were both deemed to show “strong evidence of overvaluation,” but not overbuilding. On the other hand, Calgary showed moderate evidence of overvaluation and overbuilding, but “strong evidence of problematic conditions.”

Stu Niebergall, president and CEO of the Regina and Region Home Builders’ Association, said his members are having difficulty understanding what message CMHC is trying to send with the HMA reports.

“The discussion about ‘problematic conditions’ — people don’t know what that means. Does that mean you’re going to see a 10 per cent price reduction in the future, or a 25 per cent reduction? It creates complete confusion.”

But Niebergall said his biggest concern with the HMA reports is “lack of transparency” as to how CMHC reaches its conclusions. “What we’re saying is, help us understand the data. How have you come to these conclusions? How much overbuilding do you see? By 100 units, or 1,000 units?”

Niebergall said he plans to question CMHC about the HMA reports and the methodology CMHC uses to reach its conclusions. “Unless (CMHC) starts answering some these questions, we’re going to take more aggressive steps and just say to the marketplace: ‘Completely ignore this useless report’.”

Bill Madder, CEO of the Association of Saskatchewan Realtors, said the real estate industry also has concerns about the methodology behind the HMA report, specifically the use of average prices to measure overvaluation.

“Both (Regina and Saskatoon real estate boards) have been using the HPI (housing price index, which uses a composite price of four different housing types adjusted for inflation) for years. It takes a more accurate view of what pricing should be.”

More importantly, the HMA seems to be suggesting that Saskatoon and Regina housing markets are as risky or even riskier than Vancouver or Toronto. “I have a concern being lumped in the same (category) as Toronto or Vancouver.”

But Goodson Mwale, senior market analyst for CMHC in Saskatchewan, said the HMA report was not meant to indicate which housing markets are high-risk or as a forecast of future conditions.

“It’s not our objective to compare them like that,” Mwale said. “We’re simply describing market imbalances that are becoming more entrenched or have persisted over time … It’s in no way intended to be used as forecasting tool.”

Since 2007, both Regina and Saskatoon housing markets have showed signs of overbuilding and overvaluation, which have gradually diminished over the last three years, as housing prices, sales and starts have fallen. But economic, population and job growth have also declined, which have resulted in lower demand for new and resale housing.

“Even though prices have coming down, the fundamentals have not been that strong over the last year or two. That’s what’s contributed to Regina’s case to moderate evidence of overvaluation,” Mwale said.

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