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CIBC economist: more like 15% overvalued

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guest | 05 Jan 2012, 11:18 PM Agree 0

Still, even that larger discrepancy between fair market values and selling prices won’t necessarily translate into a correction on the same scale, CIBC economist Avery Shenfeld told a gathering of Toronto business men and women Thursday.
 
"We've largely lent to those who have the income and ability to pay," he said."The catalyst for a correction just isn't there."
 
Still, he’s among the first to suggest that the price gains Canadian real estate made last year have now pushed them up by as much as 10% per cent over their true value.
 
In December, a TD report on the Canadian real estate market argued that house prices in Canada, which increased 7.5% in 2011, were 10% overvalued, reflecting the rapid gains in Vancouver and, to a lesser extent, Toronto.
 
Also late last year, the IMF cast its own wary eye over the Canadian housing market, warning of the same 10% gap.
 
Unlike Shenfeld, it expressed concern about the real probability of a correction given international economic uncertainty.
 
An external shock such as a decline in foreign demand for Canadian exports or weakening of commodity prices could see housing prices across the country fall by that 10% as unemployment grows, choking home sales, says the International Monetary Fund in a background paper for its annual assessment.
 
Still, on Thursday Shenfeld maintained that further escalation of home prices this year could ultimately lead to the same kind of challenges identified by the IMF.
 
"If we can get prices to level off,” he said, “we can avoid some of the pain later on."
  • Roger Hicks | 06 Jan 2012, 10:28 PM Agree 0
    Just another " Expert" trying to justify their ridiclulous incomes and 3 hour liquid lunches. Value is based on a willing buyer and willing seller, not a decree from on high( as in Bay Street bars). Go get a real job and do somehitng productive, rather than trying to spread all the negative spin that just creates more negativity and lowers consumer confidence.
  • Winona Reinsma | 07 Jan 2012, 01:01 AM Agree 0
    10 or 15 percent will certainly hit the first time home buyers hard as they try to get into the market now to take advantage of the historic low interest rates. It is important for consumers to watch these trends and deal with brokers that set them up with good mortgage debt management strategies.
  • John B. | 07 Jan 2012, 10:56 AM Agree 0
    I think that we should keep in mind, that there are differences in each area. You can always choose a cheaper neighborhood if you are not satisfied with the prices in the current one. For example this article shows how home sale value swings in Toronto. There was also home price decrease in various areas and not all of them are bad.
  • Jessy B | 08 Jan 2012, 07:37 AM Agree 0
    Roger Hicks..... RE Agent?
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