CMHC sees stable Canada housing, report sees bubble

* CMHC sees 2010 housing starts at 184,900 units

* Housing bubble is accident waiting to happen: think-tank

TORONTO, Aug 31 (BestGrowthStock) – Housing starts in Canada should
rise moderately this year, the federal government’s housing
agency said on Tuesday, but an independent research group
revived talk of a price bubble.

Canada Mortgage and Housing Corp (CMHC) said in an outlook
that it expects housing starts of 184,900 units in 2010,
slightly ahead of its May outlook of 182,000 units.

There were 149,081 starts in 2009.

For 2011, CMHC forecasts 176,900 housing starts, slightly
down from the 179,600 it forecast in May.

For the existing-home market, CMHC chief economist Bob
Dugan forecast 450,000 to 485,700 resales in 2010, with a
specific prediction of 463,800. For 2011, he saw 425,000 to
490,700 resales, with a specific forecast of 456,000.

CMHC did not provide a forecast for an average price but
said it would “edge lower” through the end of this year then
rise modestly in 2011.

The CMHC forecast follows data earlier this month that
showed housing starts fell for a third straight month in July,
while sales of existing homes fell 6.8 percent in the same
month, further evidence that the country’s recently hot housing
sector is no longer playing a starring role in the economic
recovery. [ID:nN16264769]

The recent data, which followed the implementation of
stricter lending rules and higher interest rates, has deflated
talk of a housing market bubble in Canada.

But on Tuesday, the Canadian Centre for Policy
Alternatives (CCPA) released a report saying there is still a
danger of housing bubble in six Canadian markets.

After examining trends in home prices in Toronto,
Vancouver, Calgary, Edmonton, Montreal and Ottawa between 1980
and 2010, the independent research organization found price
increases in those cities are “outside of a historic comfort
level”.

“The bursting of housing bubbles is a rare event in Canada,
but the steep rise in house prices in so many cities displays
all the hallmarks of an accident waiting to happen,” says the
report’s author, David Macdonald, a CCPA research associate.

In a worse-case scenario, the report predicted homeowners
in Edmonton and Montreal could be hardest hit, losing 38
percent and 34 percent, respectively, of their property value
in under three years. Vancouver homeowners would be hit worst
by dollar value, losing almost C$200,000 ($187,793).

The think tank found that house prices tended to hover
within a narrow range of between 3 and 4 times the annual
median income in the relevant Canadian province before 2000.
Currently, home prices are anywhere from 4.7 to 11.3 times the
median income, the CCPA report said.

($1=$1.06 Canadian)
(Reporting by Ka Yan Ng; editing by Peter Galloway)

CMHC sees stable Canada housing, report sees bubble