CMHC CEO admitted that he was wrong about last spring’s “doom and gloom” predications about Canadian real estate

The CEO of Canada Mortgage and Housing Corporation (CMHC) Evan Siddall is trying to explain the previous pessimistic predictions on real estate prices.

On Monday he said that unforeseen circumstances helped the national housing market avoid the worse-case scenario. Last spring, CMHC predicted a possible 18% prices decline.

“Our new outlook points to compositional mix changes, increased savings rates, new preferences, drop in immigration and reverse urbanization as unforeseen changes which explain our forecast errors,” – he noted.

Canada’s real estate prices have exceeded all forecasts during the pandemic, with a non-seasonally-adjusted national average price showing a 22.8% annual gain in January to a record mark of $621,525, says the Canadian Real Estate Association. Since CMHC’s first warning in May 2020, the average Canadian home price has increased by 25.7%.

Although CMHC’s warning was terrifying (a prices decline by 9-18%), the national economy was facing a sharply growing unemployment level and wage declines at the beginning of the pandemic.

The influence of remote work was uncertain. The work-from-home tendency let Canadians relocate from such cities as Toronto, Vancouver and Montreal and their high prices to smaller and more affordable areas.

While the housing prices seem to remain strong, Siddall believes a reversal of those remote work trends may pose a risk to the on-going home prices growth.

“We are still very concerned about an even partial reversal of these factors, economic changes, higher debt, the diversion of economically valuable investment into housing, growing inequality and higher GHG emissions after the pandemic with less populated cities,” – he added.

Though we’ve succeeded to avoid the worst-case scenario, Siddall says the CMHC’s goal was to take part in the discourse concerning Canada’s real estate market and the potential risks to homeowners.

“We’ve never pretended that we know everything or that we can see the future”, – he added. “We wanted to contribute to a discourse, although it was extremely difficult to be precise about it. Now we understand we could have made that point clearer.”