'It's like Gamestop': Mortgage expert on risk of housing correction

Prices in red-hot Canadian housing markets could be at risk of a "significant" correction amid extreme valuation and policy uncertainty heading into the new year, according to one of the country's best known mortgage experts.

Prices in red-hot Canadian housing markets could be at risk of a "significant" correction amid extreme valuation and policy uncertainty heading into the new year, according to one of the country's best known mortgage experts. 

Rob McLister, a self-professed "rate watcher" and founder of RateSpy.com, said the Bank of Canada's plan to start raising interest rates next year is just one - albeit the most important - factor that in his mind is creating a risky outlook for housing in 2022.

He cited analysis released this week by National Bank's economics and strategy team that showed the total value of Canadian real estate assets was roughly five times national disposable income as of the second quarter of this year, compared to the average of 300 per cent prior to recent rate-hike cycles for the Bank of Canada. 

"Almost no other country in the world (compares to that ratio)," McLister said in an interview Wednesday. "When you get that all-important leg on the table -- which is interest rates -- being kicked out next year, couple that potentially with some more tightening by regulators and a higher potential mortgage qualifying rate, it raises a lot of questions about real estate next year."

The prospect of regulatory adjustments in the face of rising home prices was put back on the table this week when Peter Routledge, the superintendent of financial institutions, warned about the "marginally more fragile" state of household credit as Canadians have layered on debt to get into the housing market.