Residential Market Update - Week of November 16, 2015

Nov 17, 2015, 13:15 PM by First National

A couple of recent reports about vulnerability to a correction in Canada's real estate market have been making some waves.

A report by the Canadian Centre for Policy Alternatives suggests that young homeowners (those under 40) would be hit hardest if housing prices crashed by 20%. It says one in 10 – or more than 250,000 – Canadians would see their net worth wiped out.

The authors of the report picked a 20% plunge based on Bank of Canada estimates that the Canadian market is overvalued by between 10% and 30%. But, of course, those numbers are skewed by the exceptionally high prices in Canada's two biggest and most expensive markets, Vancouver and Toronto.

The "T-V Factor" appears to be backed up by a report from one of the big banks. It examined vulnerability by region, based on household debt-to-income levels, and found British Columbia and Ontario are at the top of the list.

In general though the bank report points out that the sharp rise in household debt-to-income levels has stabilized over the last four years and low interest rates have kept payments manageable.