CMHC: Home prices could fall 47.9%

[MikePal]

With the housing market going crazy, I was wondering what CMHC was forecasting....I don't think I want to know now

Canada Mortgage and Housing Corporation (CMHC) says house prices could fall 47.9 per cent peak-to-trough with an unemployment rate of 25 per cent in its worst case scenario.

That worst case outlook is for a W-shaped recovery, which is a partial recovery followed by a resurgence of COVID-19 leading to a prolonged recession and a loss of confidence. The scenario assumptions include no government assistance, stocks and oil would fall, and four mid-sized financial institutions and one private mortgage insurer would fail.

CMHC says without government intervention in such a scenario, its solvency and capitalization would be in question. Even with help, the agency says prices would fall 31.8 per cent and the unemployment rate would be 24.2 per cent.

In a U-shaped scenario, which involves a steep but short peak-to-trough decline in GDP of 7 per cent before recovery, it sees prices falling 33.9 per cent and an unemployment rate of 14.8 per cent.

https://ca.news.yahoo.com/cmhc-home-...185740208.html

[rick_iles]

No worries ! Budgets will balance themselves !!!

[trimmer21]

Worst case scenario,MikePal. The "doom and gloomers" are at it again. Real Estate company forecasts aren't anywhere near that,although,they are forecasting a "mid market" correction if we don't get the vaccines rolling on a consistent basis citing unemployment and the collapse of the small business segment.

[MikePal]

Worst case scenario,MikePal. The "doom and gloomers" are at it again. Real Estate company forecasts aren't anywhere near that,

It says that in the first line....but CMHC is far more attuned to the negative side of Housing market than the Real Estate boards that want to project the most positive side of the Market. We all know a market correction is coming, so somewhere in between, I'm guessing the higher side of loses

I was watching an analysis of the vacancy rates in the cities. This pandemic is killing the business real estate/leasing market. Swaths of storefronts and office towers are empty and a whack of condo's sitting empty as tenants moved out of the city when their jobs could be done at home.

Saw this morning 1 in 6 businesses have failed in the past year...

[greatwhite]

I doubt if houses will fall by that amount, you cannot build a house for less then 200 thousand excluding the land. Just to replace my house which was built in 1973 the cost would be approx 275000 with material and labor.

[410001661]

There might be a correction coming but the one rule that will buck market trends is LOCATION - LOCATION - LOCATION. You may see a drop in some areas or type of houses (ex) condo's but there are areas that will still demand top $$ and there are people that will pay that, and maybe more, to move there.

I doubt you will see a large correction without increasing the mortgage rate

[impact]

I believe it. With all the small business closures and loss of income the UBI will only cover so much rent or home ownership. The housing bubble will burst.

"Prior to the second wave of infections, the CFIB estimated 160,000 businesses in Canada would fail before the pandemic ends. Kelly raised that number to 225,000, or more than one-in-seven."

https://www.bnnbloomberg.ca/up-to-22...-ceo-1.1520974

"As of December 2017, the Canadian economy totaled 1.18 million employer businesses. Of these, 1.15 million (97.9 percent) were small businesses, 21,926 (1.9 percent) were medium-sized businesses and 2,939 (0.2 percent) were large businesses."

[410001661]

I believe it. With all the small business closures and loss of income the UBI will only cover so much rent or home ownership. The housing bubble will burst.

"Prior to the second wave of infections, the CFIB estimated 160,000 businesses in Canada would fail before the pandemic ends. Kelly raised that number to 225,000, or more than one-in-seven."

https://www.bnnbloomberg.ca/up-to-22...-ceo-1.1520974

"As of December 2017, the Canadian economy totaled 1.18 million employer businesses. Of these, 1.15 million (97.9 percent) were small businesses, 21,926 (1.9 percent) were medium-sized businesses and 2,939 (0.2 percent) were large businesses."

I would like to say that if this keeps going there will be a large protest, rebellion (or at least some push back) but Canadians are way too soft - we are good complainers but that is about it. That is why I admire some European countries. They do not take any crap from their gov't and are not afraid to have a strike to protest.

It is clearly obvious that both the provincial and federal gov't are talking our of both sides of their mouth. What gets me angry is that they are not even hiding it anymore because they know we will do squat.

[MarkB]

That likely won't happen until they raise the prime interest rate to around 4% to 5%.
We need the dollar to crash first, sending inflation through the roof.

[MikePal]

I'm not a money guy..but if I understand the basics: A $500K buy will require $100k downpayment (20%) to get a CMHC insurance at 2.4 % so will add $12K to the cost. So that mortgage will cost you about $520K over 25 yrs at 2%. If mortgages go up to 5% that will drive it up to about $720K .

Yea that will break a few balls HaHa..