Credit rating agency Fitch says Canada will have one of the largest housing corrections in the world
Fitch Ratings released an analysis showing that global real estate prices are likely to correct, with Canada expected to experience one of the biggest busts in the world.
Canadian residential real estate prices showed one of the sharpest climbs in the world, climbing 41% from 2020 to the peak in 2022.
Canadian home prices are forecast to fall 15% from peak to trough, with losses expected throughout this year.
The agency estimates Canadian real estate prices were 29% overvalued at the end of 2022, with overvaluation expected to come down sharply in the coming months but not completely disappear, especially in Toronto and Vancouver.
Fixed rate mortgage borrowers have seen monthly payments rise $300 on average, while variable rate mortgage borrowers have seen an average increase of $700 per month.
Delinquencies are expected to rise as mortgage payments increase and economic conditions weaken, with the arrears rate forecasted to climb 64% to 0.23 points of mortgages in 2024.
Cheap credit and assistance preventing defaults have distorted the system since 2020, but as that credit gets worked out of the system and defaults normalize to non-stimulus conditions, things are seen as returning towards pre-2020 metrics when it comes to defaults and sales.
Home prices aren’t expected to fully correct the overvaluation.
“If things erode in the US worse-than-expected, they warn it can test Canada’s resilience.”
See the full story here: https://betterdwelling.com/canadian-real-estate-price-correction-to-be-one-of-the-largest-in-the-world-fitch/
