Considering that an institution empowered and supported at arm’s length by the Government of Canada and tasked with the job of research, education, information dissemination, fiscal stimulus, and distribution of mortgage insurance vehicles to the housing industry (among other things) could get everything about the impact of Covid-19’s impact on the Canadian real estate market (and the economy at large), so completely wrong is a mystery. And it remains a mystery after the release of their newest research paper entitled: “Housing Market Information – HOUSING MARKET INSIGHT: Canada’s Major Markets,” which was released last week, 25th February 2021.
With only the subtlest hint at their botched research and conclusions as follows from the preview to the report:
“At the time these forecasts were made, extreme uncertainty prevailed about how the pandemic and its economic consequences would evolve. Although further work is required to fully understand housing market dynamics during the pandemic, more data are now available on these impacts. Preliminary results suggest that uneven distributional impacts of the pandemic across income groups have played a central role in determining the evolution of the housing market. Higher-income households—who tend to be homeowners—had greater opportunities to adjust by working from home and maintaining their income. Their rapid adjustment meant that financial recovery was faster for them, and they could remain optimistic about purchasing housing. Commitments to accommodative fiscal and monetary policy reinforced expectations that the economy would recover.”“Home Sales and Prices in Major Markets During the Pandemic” – CMHC – 25 Feb 2021
Right through to the end of this same introduction wherein they claw-back even this meagre attempt at admitting they screwed-up big time:
“Home Sales and Prices in Major Markets During the Pandemic” – CMHC – 25 Feb 2021
“Although housing activity in most major markets has been unexpectedly strong during the pandemic, we remain concerned about major risks that will underlie our upcoming Housing Market Outlook report to be released in the second quarter of 2021. In particular, employment conditions remain below pre-COVID levels while the high level of supportive government income measures are temporary in nature. Full and sustained recovery continues to depend on the uncertain course of the pandemic.”
The fact of the matter is, CMHC, with all its resources & staff as well as its incredible capacity to influence the course & trajectory of the real estate industry, was not only abysmally wrong in their conclusions but also completely impotent in their ability to alter the course of the ensuing market triumph. And thank God for the latter. Because who knows how many people took their seemingly sage and authoritarian advice and lost fortunes by dumping their investments, homes, portfolios, and/or who did not pursue opportunities that are now long gone and out-of-reach forever. There needs to be a proper, formal apology from this institution and a revisit of their mandate, policy, and historical record for this alone.
More than anything now, from the perspective of hindsight, much of their overreaching and domineering, sneering, and cajoling attempts to bully the market into fitting their vision seem to have been because of their leadership. It struck me then and again today, especially upon re-watching & re-reading the Special Finance Committee Meeting’s text with the head of CMHC on Tuesday 19th May 2020, that there was something not quite right with both the tone and the argument being put forward by CMHC. This argument was subsequently summarized and explored in their special report (2020 Housing Market Outlook — Special Edition), released after this meeting on 27th May 2020. And their agenda was pushed hard by both the institution and its leadership in the days, weeks, and months that followed despite and in the face of hard evidence of their incorrect conclusions.
Based on their wrong-headed research, that same institution changed the eligibility requirements to qualify for an insured mortgage effective 1st July 2020. A move above and beyond the already controversial & hated OFSI Stress Test instituted 1st January 2018. It was remarked that this one action by CMHC could itself create all the issues and economic fallout that they claimed would be coming because of Covid-19’s impact on the economy. And, strangely enough, even their Machiavellian actions were not enough to squash the force of the desire of Canadians to buy and own their own homes. Which, ironically, is/was and remains their main impetus for being – to help every Canadian fulfill their dream of homeownership. It is their promise for 2030:
“I’ll wrap up by saying that, at CMHC, along with our 2,000 colleagues, Romy and I remain fully committed to our aspiration that by 2030 everyone in Canada will have a home that they can afford and that meets their needs. If anything, COVID-19 has brought the value of stable shelter into sharp relief, strengthening our resolve.”STANDING COMMITTEE ON FINANCE – NUMBER 029 – 1st SESSION – 43rd PARLIAMENT – EVIDENCE: TUESDAY, MAY 19, 2020
How we would ever arrive at the fulfillment of such a promise by consistent error-ridden interpretation of research and the promotion of acrimonious, almost apocalyptic conclusions is beyond me. Especially when the flurry of press releases with bizarre & arcane cultural references and even personal attacks upon anyone with a counter-opinion to that of CMHC’s (which was many and growing) seems like the most counter-intuitive approach of either a madman or a genius.
I think that the release of the newest report from CMHC (now under new management) is sufficient cause for an in-depth federal investigation as to what went on and why it could continue until now. There needs to be a reckoning for this misguided and misaligned abuse of power that CMHC wielded and wielded so pervasively. If, in their conclusions, such a task force finds fundamental evidence of wrongdoing, then punishments must be meted out swiftly and decisively. Because, as mentioned at the outset of this opinion piece, it may be impossible to quantify the damage that CMHC enacted upon individuals and our overall economy. However, anyone with a modicum of intelligence can surmise that it must have been enormous and certainly irreparable.