In its biannual Financial System Review published yesterday, the Bank of Canada acknowledged that the country’s housing market may be overvalued by as much as 30%. Amid concerns that Canada’s housing market may be overheated and due for a correction, the Bank of Canada’s new overvaluation estimate is significantly higher than estimates of approximately 10% previously provided by the International Monetary Fund and the Canada Mortgage and Housing Corp (the Canadian equivalent of Fannie Mae and Freddie Mac). The Bank of Canada’s report also highlighted the record levels of Canadian household debt that underlie the protracted increase in home prices. This raises the question of how soon a correction in the Canadian housing market could occur and how significant of an impact it could have on the Canadian banking system.

via Bank of Canada: Canadian Housing Market Overvalued By As Much As 30%.