Canadian housing market in good shape -federal housing agency

Wed Dec 18, 2013 11:21am EST
 
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By Andrea Hopkins and Leah Schnurr

Dec 18 (Reuters) - Canadian condominium construction has surged but population growth has kept oversupply in check, the federal housing agency said in a report on Wednesday that also showed declining mortgage arrears and high home-equity levels.

In its annual report on the housing market, the Canada Mortgage and Housing Corp pointed to steady mortgage debt and an increasing number of households as evidence that residential real estate is in good shape, despite warnings from observers that the market is overheated.

Canada's housing market avoided the crash experienced in the United States five years ago, due in part to more conservative lending standards and a stronger economy. While economists have long predicted an eventual correction in Canada, they are divided over whether prices will drop sharply or simply stagnate in a so-called soft landing scenario.

The agency's report showed some 41 percent of homeowners have no mortgage, while the rest typically have solid equity levels, accelerated mortgage payments or declining arrears.

As of June 2013, 0.31 percent of residential mortgages were three or more months in arrears, compared with 0.33 percent 12 months earlier, CMHC said. Arrears averaged 0.41 percent in the decades 1990-2010.

About 31 percent of recent buyers made lump-sum payments or increased their regular payment in 2012 to pay off their mortgage sooner, and 44 percent had their payment set above the minimum, the report showed.

The average amount of equity for homeowners with mortgages was 47 percent, and 71 percent have at least 25 percent equity in their home. Only 7 percent had less than 10 percent equity as of April 2013, suggesting only about 7 percent of homeowners would be "under water" if prices dropped more than 10 percent.

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