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Massive Chill Effect

Suze Cumming | May 21, 2020

CMHC released a prediction yesterday that home prices could fall by up to 18% in the next 12 months.  It’s a bold prediction and whether it is fundamentally right or wrong, it’s going to change the market right now. They also stated that they are going to change their underwriting practices.

Buyers will pull back and wait.  Banks will reassess their mortgage lending criteria. The market it going to become very quiet.

The market will not react uniformly across the country or even across different parts of each market but mark my words, this will have an immediate chill effect everywhere.

https://www.theglobeandmail.com/business/article-canada-mortgage-and-housing-corp-predicts-house-prices-could-drop-up/

I’m asking myself, “Why did CMHC release this prediction and why now?”  They know exactly the effect it will have on the market.

My best guess is that they are trying to accelerate the decline so that the recovery can begin. Real Estate market declines often lag the economic situations that caused them by 6-24 months.  This results in very low sales volumes which contributes to the economic slowdown.  Housing and the economic activity associated with moving is a significant driver of the economy.

In addition, buyers who buy early in this cycle overpay and get saddled with mortgages in excess of the value of the home and contribute to the negative cycle.

What should you do?  If you have sellers that need to sell they should make a significant price reduction right away and see if they can catch the tail of the market.  Other than that, it’s time to dig deep on understanding the economic impacts of what’s going on, continue to have conversations with your sphere, stay in contact with thought leaders in your market and keep your spending under control.  For some, this might be a good time to retire or make the leap to another career.   This isn’t going to be easy.

If you feel unprepared, reread my blog post from March 26th

Unsure of What CMHC does?  Bloomberg has written a good article on it here:

 

 

Massive Chill Effect

Suze Cumming | May 21, 2020

 

CMHC released a prediction yesterday that home prices could fall by up to 18% in the next 12 months.  It’s a bold prediction and whether it is fundamentally right or wrong, it’s going to change the market right now. They also stated that they are going to change their underwriting practices.

Buyers will pull back and wait.  Banks will reassess their mortgage lending criteria. The market it going to become very quiet.

The market will not react uniformly across the country or even across different parts of each market but mark my words, this will have an immediate chill effect everywhere.

https://www.theglobeandmail.com/business/article-canada-mortgage-and-housing-corp-predicts-house-prices-could-drop-up/

I’m asking myself, “Why did CMHC release this prediction and why now?”  They know exactly the effect it will have on the market.

My best guess is that they are trying to accelerate the decline so that the recovery can begin. Real Estate market declines often lag the economic situations that caused them by 6-24 months.  This results in very low sales volumes which contributes to the economic slowdown.  Housing and the economic activity associated with moving is a significant driver of the economy.

In addition, buyers who buy early in this cycle overpay and get saddled with mortgages in excess of the value of the home and contribute to the negative cycle.

What should you do?  If you have sellers that need to sell they should make a significant price reduction right away and see if they can catch the tail of the market.  Other than that, it’s time to dig deep on understanding the economic impacts of what’s going on, continue to have conversations with your sphere, stay in contact with thought leaders in your market and keep your spending under control.  For some, this might be a good time to retire or make the leap to another career.   This isn’t going to be easy.

If you feel unprepared, reread my blog post from March 26th

Unsure of What CMHC does?  Bloomberg has written a good article on it here:

 

 

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