MONTREAL ― Members of Canada’s real estate and mortgage lending industries have lashed out at the head of the country’s government-run mortgage insurer for a forecast they say is far too pessimistic.
Evan Siddall, CEO of Canada Mortgage and Housing Corp. (CMHC), told a parliamentary finance committee last week that he expects the Canadian Real Estate Association’s (CREA) house price index to fall between 9 and 18 per cent in the wake of the COVID-19 pandemic.
Despite criticism from industry, the CMHC reiterated its house-price prediction in a report issued this week.
That forecast also predicts home sales will be down 19 to 29 per cent after the pandemic, and it sees a massive decline in new housing construction of between 51 and 75 per cent, before starting to recover early next year.
These scenarios have many industry insiders and analysts worried that the CMHC could be panicking the public into a housing crash.
“The worry … is that the very public warning from the crown corporation becomes self-fulfilling,” Stephen Brown, senior Canada economist at Capital Economics, wrote in a client note.
Christopher Alexander, an executive vice-president and regional manager at Re/Max of Ontario Atlantic Canada, put it more harshly.
“Sellers simply won’t accept that kind of discount on their listings. A statement of this nature is panic-inducing and irresponsible,” he said in a statement issued Friday.
Re/Max, which has called for a 2.9-per-cent decrease in house prices nationally this year, noted that other experts aren’t forecasting such large drops, with most forecasts calling for a short-term decline of 5 to 10 per cent.
Siddall strikes back
Siddall took aim at his critics in the industry in a series of tweets coinciding with the release of the CMHC’s forecast.
“They’re whistling past the graveyard and offering no analysis,” the CMHC chief quipped.
Capital Economics’ Brown forecast earlier this month that the Teranet house price index would fall 5 per cent, but would stay below its peak levels “for years” as he expects there to be drag from lower immigration and higher debt levels.
But the CMHC’s forecast may have changed the situation, Brown argued.
“We are concerned that some damage may already have been done. As the history of boom-and-bust cycles shows, individuals’ expectations play a big role in how house prices develop.
“With the CMHC’s alarming forecasts covered by all the major news outlets this week, some Canadians have probably become far more concerned about prospects for the housing market.”
A consumer confidence survey taken in the week ending May 22 found that confidence in the housing market is the lowest on record.
The Bloomberg-Nanos consumer confidence index for real estate was 9.89, out of a possible 100. Any score below 50 suggests that more people are pessimistic than optimistic about the market.
That came even as Canadians’ confidence in other parts of the economy began to rebound. The overall consumer confidence index rose to 39.32 from around 37 four weeks earlier. However, that is still close to the worst level in records going back to 2008, worse than at any point during the financial crisis a decade ago.