CMHC is getting ready for further influences of COVID-19 on the real estate market

Canada Mortgage and Housing Corp. (CMHC) is getting ready for more influences the COVID-19 pandemic will have on the national real estate market.

According to the Corp., the housing market will have to deal with strong short-term uncertainty and lower demand for real estate in the short term.

As you know, July saw record high home prices growth and sales, as the market tried to offset the spring slowdown.

However, in CMHC’s opinion, the economic shock of the pandemic has not yet been fully seen in the recent housing market data. The Corp. expects further risk to prices, sales and new construction.

“Although it will take several months for the economic influences of COVID-19 to materialize, certain factors are already seen in our financial results. For instance, we see the impacts in our provisions for insurance claims,” – noted Lisa Williams, CMHC’s chief financial officer.

In the second quarter, CMHC’s net income reached $566 million, which is up from $379 million reported a year earlier. The arrears rate was 0.34%.

As CMHC took on new government programs and funding, it also faced claims expenses growing sharply by $256 million, or 711%. Such a hike was caused by growth in provisions for COVID-19 related claims.

In 2020, CMHC has bought $5.8 billion of insured mortgage pools as part of a government program. Moreover, it’s administering the Canada Emergency Commercial Rent Assistance program for small businesses.

The Corporation’s next report will concern the influence of its stricter underwriting criteria, which tightened credit score and down payment requirements for insured mortgages, starting July 1.

CMHC also suspended dividends in order to increase savings for a possible further government action.

“We are in a strong financial position, we can bear the full effect of COVID-19 and take more steps towards supporting Canadians and the economic recovery”, – Williams noted.