Edmonton’s Home Overvaluation is Correcting, According to the CMHC

Posted by Gurpreet Ghatehora on Saturday, March 5th, 2016 at 7:09pm.

Reports from Canada’s leading authority on real estate markets and housing prices show that Edmonton is already experiencing a housing correction as a result of the Alberta economy. But rather than seeing this as a negative, such a correction can actually be a positive thing for many Edmonton residents. Here is some information on the housing correction, what it means, and what such changes bring to Edmonton’s real estate markets for 2016.

To begin, overvaluation is when homes are sold at price levels “that are not fully supported by fundamental drivers such as income, mortgage rates and population growth,” according to the Edmonton Journal. When this happens, homes are often “overvalued,” or sold for prices that aren’t in line with the usual markers for a home’s worth. The result is an inflated market, which can cause problems for a housing market and lead to issues like housing bubbles, an inability for people to become home owners, and many other issues that can be seen in Vancouver and Toronto’s housing markets in particular. If left alone, inflated pricing can often hurt an economy, especially if it experiences a decline, which is why market corrections sometimes occur.

Market corrections happen when a downturn in the economy sees homes return to their more natural pricing that’s based on the usual markets. And while it can be bad for some property owners, the lowering prices can actually be beneficial for the market as a whole, including new buyers, people looking to upgrade, and new home owners.

But things are changing in Edmonton according to a report by Canada Mortgage Housing Corp. and market analyst Christina Butchart. According to the report, Edmonton’s housing market showed ‘moderate evidence of overvaluation’ in the third quarter of 2015. But prices are moving down, helping to push the market back into balance.”

Overvaluation, and subsequent market corrections, are signs of the markets controlling themselves and leading to fairer, more accurate housing pricing. For Edmonton, that means the lower listings and subsequent lower housing prices are more accurate reflections of the state of the economy. It also could lead to problems as Edmonton’s single-family housing is still building, with fewer and fewer people buying. Such vacancies, however, spell good news for anyone wanting to get into a home of their very own.

Rather than seeing a housing correction as a negative thing, it can actually be seen as an opportunity for the vast majority of Edmonton residents. It shows that overvaluation can be corrected, regular people can enter the housing market, and that affordable housing can still exist in Alberta’s capital region.

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