CMHC plays catch-up with vaguely alarming house price warning: Don Pittis

Warnings about the Canadian property market are nothing new. International business publications and global banks have been calling it a bubble for years.

Nobody listened.

Now that the Crown corporationthat insuresresidential mortgages, the Canada Mortgage and Housing Corporation,has added its voice with what turns out to be amushy and moderate warning, will anybody listen?

Dire warnings

Warnings in the past have been dire. Swiss bankers UBS have called Vancouvera bubble risk unmatched on the planet.The giant German institutionDeutsche Banksaid in January 2015 that the Canadian housing market was 63 per cent overvalued.

• CMHC waves red flag on Canada's housing market
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The rich countries' think-tank, the OECD, has warned of the threat repeatedly. The Wall Street Journal and the Economist predicted a collapsebefore 2012.

I know that because my own annual warning that year,"Be Very Afraid of the Canadian Housing Bubble,"referred to those previous warnings.

Only last week, CMHCCEO EvanSiddall announced a "red warning"of his own in a commentary published inthe Globe and Mail.

Surprisingly weak

When we finally saw the CMHC reportsyesterday and listened to an abbreviatedtelephone conference with the agency's economist BobDugan cut off early before many of us could ask our questions the warning was surprisingly weak.

Although there were lots of red marks in the CMHC'sassessment of the Canadian property market, the overall conclusion was as far away from a 63 per cent correction as you could imagine.In fact, it seemed to say that in most places the property market would continue to rise before going flat.

Overvalued? What?

To many critics it might seem absurd that after property prices have been rising between eight and 25 per cent for years the CMHC is only now discovering overvaluations are in the "red" category.

In itsoutlook for the comingyearsthe CMHC'sanalysis was no more terrifying. In an innovative statistical flourish, the housing agency prediction included two sets of data, a narrow likely path in greyand the wild and crazy outer range indicated withdotted lines.

As CMHC economist Dugan said in his conference call,predictingthe effect ofhousing market risks isdifficult.

"These risks include things such as uncertainty with respect to the futurepath of oil prices, upside and downside risks to U.S. and world growth," said Dugan.

What's the worst?

As you see above, the CMHC'sthinking shows that even if oil prices crash or a booming U.S. economy sends interest rates into the stratosphere, the worstpossible forecast forCanadian house prices is that they will continue to rise at about the same rate.

Anyone considering buying or sellingshould take a look at the two reports(see links posted on this page)in detail. They are not long, are clearly written and easy to digest.

If you take the CMHC analysis at face value, you should notexpect to be scared out of the property market any more now than when I told you to be afraid in 2012. And if you laughed off DeutscheBank's 63 per cent warning, maybe you'll be rushing out to up your stake in Canadian houses.

But there is another way to view the CMHC's report that was hinted at, though not explicitly stated, when my colleague CBC Business reporter Jacqueline Hansen phoned to squeeze in aquestion that had been cut off in the conference call.

It is that the CMHCseems torealizethat, after years of being a property market booster, taking a sterner line on the future of Canadian houses will have an effect of its own, especially after its red alerts have been amplified through the media.

There is some danger that being overly gloomy could cause a bubble, if there is a bubble, to burst, driving the economy into a tailspin. Of course no one knows whether a delayed reaction to the latest round of government rules to slow the house market could still have that effect.

If so, we will be glad thatthe CMHC'schange of tune,the soothing concession thathouse priceincreases couldslow and maybe even stop, was not more frightening.

You just wonder why the CMHC couldn't bring itselfto say it a few years ago before housesgot so dangerously overvalued.

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