Home prices in Canada are overvalued by 14%, while affordability is eroding dramatically in some parts of the country, say two new reports on the state of the housing market.
“When it comes to prices, by almost any measure, Canadian home prices are overshooting their fair value,” CIBC Senior Economist Benjamin Tal said in a report Tuesday. “The pace of appreciation has been quicker than justified by housing market fundamentals.”The bank says the average price of a home has risen by almost 23% since the cyclical low of January 2009, and about 7% above recession levels.
As a result, at least 1.5 million homes across Canada are overvalued, particularly in Western Canada, and a price drop of 5% to 10% over the next 12 months would not be unlikely, said Tal.
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