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CMHC drops hints housing market may be overvalued

Canada’s housing agency said national home prices that are persistently higher than in the U.S. may signal an overvalued market and it’s analyzing the reasons for the differential.

Average Canadian home prices were about $400,000 at the end of 2013, compared with about $250,000 in the U.S., Canada Mortgage & Housing Corp. said in its annual review Thursday. Canadian prices have continued to rise while U.S. prices haven’t recovered from the 2007-2008 slump, CMHC said.

“This Canadian ‘premium’ could be cause for concern,” the Ottawa-based agency’s report said. “CMHC is analyzing these differences, in order to understand the reasons for the price differential, be they structural, temporary or reflective of relative overvaluation in Canada.”

Officials at CMHC, the federal finance department and Canada’s central bank have said they’re not concerned about a domestic housing bubble, saying only some urban markets such as Toronto and Vancouver are at risk from high prices or rapid construction. The housing market is “robust” and only some parts are overvalued, CMHC Chief Executive Officer Evan Siddall said in an Oct. 20 speech in Toronto.

Concerns that Canada is vulnerable to a sharp correction like the one the U.S. underwent “have been persistent,” the agency said today.

Consumer debt burdens are holding near record highs this year as the lowest mortgage rates in decades fuel unexpected gains in home sales and construction.

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