First: What is CMHC? CMHC is the Canada’s national housing agency. If you’re following the headlines related to real estate, you’ve likely about the news release issued by the Canadian Mortgage and Housing Corporation (CMHC) regarding their forecasts for Canadian real estate. UPDATE 2021: The CMHC predictions were clearly wrong
CHMC, Canada’s largest provider of mortgage insurance in Canada, estimates an incredible 9-18% decrease in the average home values across the country by 2021.
Really? Does this apply to Guelph real estate prices?
Although 18% would be a steep decline, Guelph may see declining prices in the next 12 months, much to buyers’ delight.
CMHC gave a variety of reasons why they believe the market will decline. This includes record household debt, increased mortgage defaults and increased unemployment.
Interestingly, shortly afterwards CMHC also introduced new measures on qualifying credit scores and debt ratios. This will make it more difficult to qualify for a mortgage if insured by CMHC.
There are a few things to consider from this announcement. First, CHMC’s predictions are national, meaning that some areas will have a greater impact than others. The other major issue is that the CMHC has inaccurately estimated the value that Baby Boomers have on the market: they’re not moving. This disrupts the supply chain of houses.
Western Canada for example, will be hit far harder than Ontario due to declining energy prices. Secondly, Guelph continues to see a huge influx of GTA buyers leaving the 416 and 905 for more affordable homes. And lastly, using “average price” is tricky and often misleading- it’s only one indicator of market health.
Beware of using average home price as your basic measure
We use average price as a simple, easy to read metric within the real estate world. The average price of a home in Guelph has increased by over 9% this year. This seems like a pretty good statistic on its own.
This could be because a greater number of higher-end homes have sold. Or it could be less entry-level homes have sold. It likely doesn’t mean that the average home in Guelph is worth 9% more than one year ago.
Let’s take a look at what happens when you add a few more metrics:
Average price: +9%
Dollar volume (sales of all home prices added together) -7%
Number of homes sold -14%
Now you can see that there is more to the story. In fact, there are over 130 less homes sold this year than last year from January to May. This is significant information to take into account. Does that change things for you?
Guelph needs more factual, unbiased market information than national CMHC data
The moral of the story is that Guelph homeowners deserve more detailed, factual information on the market.
Not Beth and Ryan’s clients? That’s OK! Beth and Ryan believe that everyone should have access to this information. This will help Guelph home buyers and sellers better understand the market. It’s from a neutral point of view, without obligation- read all of their blog posts here.
Considering the current market conditions, Beth and Ryan Waller predict that the average price of a home in Guelph will increase by 1-3% in 2020. They also predict more of a balanced market than today. Update: didn’t happen!
Where Guelph will gain in GTA buyers moving west, it’s predicted that we will lose in Guelph sellers. They’ll be moving out of town. Those who have postponed a move due to job insecurity and tighter qualifying restrictions.
If you have any questions on the Guelph real estate market, contact Beth and Ryan Waller