The Canadian Association of Accredited Mortgage Professionals stops short of calling the ongoing slide that began about nine months ago a crash, but chief executive Jim Murphy says policy-makers should stop trying to tighten lending rules further and start thinking about helping for first-time purchasers.
"They've gone enough in terms of regulatory changes and we're seeing a real slowdown in the overall housing market. The federal government wanted that to happen, but the question is how much ... and what is that impact on the overall economy," Murphy said Wednesday.
"Some people thought the market would come back(this spring). Well it hasn't come back. It is a definite trend."
Murphy notes that his organization never agreed with the perception that Canada had a housing bubble problem, but any concerns on that front have been dispelled following last summer's action by Finance Minister Jim Flaherty and the bank regulator to tighten mortgage rules and loan underwriting practices.
Since then, home resale activity has fallen 8.3 per cent and housing starts by 15 per cent. They are likely to fall further, the report says.
CAAMP predicts that by mid-2015, national home construction will fall to about 150,000 units annually, or about 25-30 per cent less than the 205,000 average for 2011-2012. That will result in about 150,000 fewer construction and indirect jobs, such as in the real estate sector and support industries.
In the Toronto area, the tumble will be even more dramatic, with starts dropping 50 per cent to about 22,000, leading to a loss of about 35,000 jobs.
Vancouver — the other municipality known for its hot housing market — starts are expected to fall by a third to about 13,000, resulting in a loss of about 7,500 jobs.
Quebec urban areas are projected to lose about 15,000 starts and 20,000 jobs.
Among the major markets, Calgary and Edmonton are expected to buck the trend. The report says the two Alberta cities will see home construction activity increase, generating 2,500 additional jobs each.
"Until now, housing has played a major role in the recovery from the 2008/09 recession," CAAMP chief economist Will Dunning notes. "That economic driver is disappearing as we see housing related jobs dry up and consumer confidence erode at a time when the national recovery is struggling to pick up steam."
Last week, the Office of Superintendent for Financial Institutions gave notice it is looking into whether it needs to lower the amortization period to 25 years for homeowners with over 20 per cent equity, so-called conventional mortgages that do not require government-backed insurance.
"You question why all these things need to be done in an environment where the market is slowing dramatically," said Murphy.
Instead, Murphy said he has asked Ottawa to consider indexing the RRSP homebuyers plans, or giving more flexibility to qualifying first-time buyers in terms of amortization periods to lower monthly payments.
There is also some good news in the report, including that most Canadian homeowners are having little difficulty meeting mortgage payments and are in fact paying off their debts faster than required.
Almost seven in 10 homeowners responding to an online survey said they have fixed mortgages and are paying a lower interest rate (3.52 per cent) than last year (3.64 per cent). Some 18 per cent of respondents said they had increased their payments in the past year and 16 per cent said they had made lump sum payments.
As well, most mortgage holders said they expect to repay their loan 3.4 years earlier than the 25 year amortization period.
The Canadian Association of Accredited Mortgage Professionals based its estimates and projections on a number of sources, including raw data and an online survey of about 2,000 homeowners and renters that was conducted in April by Maritz.