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Canada Mortgage and Housing Corp. is not removing the red flag it raised three months ago for the housing market, saying it still sees strong overall evidence of problematic market conditions.

The Crown corporation, which provides housing advice for the federal government, said Thursday it has kept the rating for a second consecutive quarter due to overvaluation and price acceleration in the country’s housing markets.

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“Price acceleration in Vancouver, Victoria, Toronto and Hamilton indicates that home price growth may be driven by speculation as it is outpacing what economic fundamentals like migration, employment and income can support,” said Bob Dugan, chief economist with CMHC.

Dugan said, during a call a conference call with reporters, that Victoria saw moderate evidence of overvaluation which contributed to its overall rating. CMHC reported this week that price acceleration has spread this week to neighbouring communities around Toronto and had warned previously of similar affects in the Vancouver area.