Category: National Real Estate News

OTTAWA, February 22, 2013 — Moderation in economic and employment growth in the second half of 2012 has led to more modest housing demand. With continued moderation expected in the first half of 2013, total annual housing starts are expected to be lower in 2013 relative to 2012, according to Canada Mortgage and Housing Corporation’s (CMHC) first quarter 2013 Housing Market Outlook, Canada Edition1.

As fundamentals, including employment, economic growth and net migration are expected to gain momentum later in 2013 and in 2014, housing starts are expected to trend slightly higher next year.

“CMHC expects housing construction activity will trend lower in the first half of 2013, before gaining more momentum by the end of the year as economic and employment growth remain supportive of the Canadian housing market,” said Mathieu Laberge, Deputy Chief Economist for CMHC. “In 2014, improving economic conditions may be partially offset by a slight moderation in the number of first-time homebuyers, and potential small and steady increases in mortgage interest rates.”

On an annual basis, housing starts are expected to range between 178,600 to 202,000 units in 2013, with a point forecast of 190,300 units, following a level of 214,827 units in 2012. In 2014, housing starts are expected to range from 171,200 to 217,000 units, with a point forecast of 194,100 units.

Existing home sales are expected to range between 418,200 to 484,000 units in 2013, with a point forecast of 451,100 units, following a level of 453,372 in 2012. In 2014, Multiple Listing Service® (MLS®2) sales are expected to range from 439,600 to 505,000 units, with an increase in the point forecast to 472,300 units.

The average MLS® price is forecast to be between $356,500 and $378,500 in 2013 and between $363,800 and $390,800 in 2014. CMHC’s point forecast for the average MLS® price calls for a 1 per cent gain to $367,500 in 2013 and a further 2.7 per cent gain to $377,300 in 2014.

As Canada’s national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable housing solutions. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.

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This article appeared in the Financial Post on November 9th, 2012 and was written by Andrea Hopkins (Reuters).

TORONTO — Canadian housing prices will fall 10% over the next several years and homebuilding will slow sharply in 2013, but the country’s recent property boom is not expected to end in a U.S.-style collapse, according to a Reuters poll.

The survey of 20 forecasters published on Friday showed the majority believe the Canadian government has done enough to rein in runaway prices, preventing the type of crash that has devastated the U.S. market for years.

“This isn’t a sharp correction, this isn’t a U.S.-style correction, it’s just simply an unwinding of the excess valuation that was created by artificially low interest rates for a long period of time,” said Craig Alexander, chief economist at Toronto-Dominion Bank.

“I would emphasize that while a 10% correction sounds scary, in actual fact, this would be a healthy outcome.”

U.S. house prices crashed as a mortgage crisis unraveled in 2008, triggering a financial crisis and leaving a trail of foreclosures, negative equity and financial hardship for millions of people. Housing prices in the U.S. have only begun to rise again this year.

On a national basis, Canadian house prices are expected to drop 10% over the next several years, and housing starts will fall more than 17% to 184,000 units by mid-2013, according to median results of the poll, which was conducted over the last week.

House prices have already begun to cool in some areas but nationally remain 23% higher than their trough in March 2009, according to a Canadian Real Estate Association index.

Respondents in the Reuters poll said house prices will rise 2.0% in 2012 and fall 0.1% in 2013, according to the median of 18 forecasts, putting most of the losses at least two years away.

Median forecasts had Toronto prices rising 5.1% in 2012 and falling 1.3% in 2013. But respondents saw an eventual 5% fall from current levels. Vancouver prices were forecast to fall 2.7% in 2012 and 3.8% in 2013, with an eventual decline of 12.5%.

As sales decline and prices fall, homebuilders will ratchet back on construction starts, the poll showed.
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Housing starts, which notched a seasonally-adjusted annual rate of 222,945 units in the third quarter, will decline to 200,500 in the fourth quarter, 186,900 in the first quarter of 2013, and 184,000 in the second quarter of next year.

BITE OUT OF GROWTH

That 17.5% drop in new homebuilding will take a bite out of Canada’s economic growth, fuelled by the housing sector, consumer spending and government stimulus since growth slowed in 2009. But a strengthening global economy should help pick up the slack, Alexander said.

Not everyone is as sanguine. While economists at Canada’s major banks have consistently predicted a softening in prices and a slowing in housing starts, some independent analysts see a very hard landing ahead.

“The housing market is something to be very worried about,” said David Madani, Canada economist at consultancy Capital Economics in Toronto.

Madani, whose forecasts are included in the Reuters poll, has consistently predicted a 25% drop in prices and a plunge in housing starts to just 150,000 next year as builders grapple with too many homes and falling demand.

“The one symptom that housing bubbles always have in common is the over building, and I feel the banks play this down a bit,” said Madani, pointing to recent housing starts well above the 175,000 to 185,000 pace economists say is needed to keep up with population growth.

“We’ve been building above 200,0000 for several years. And we know we’ve been building above demographic requirements because the evidence is in the inventory data – it’s high, it’s not low,” said Madani.

“The excesses are there, it’s plain and clear to see.”

Still, all 15 respondents who answered an additional question said they believe the Canadian government has done enough to slow the housing market and prevent a U.S.-style crash, as Finance Minister Jim Flaherty has argued.

RULE CHANGES HURT

Mindful of the U.S. boom and bust, the federal government tightened mortgage lending rules four times in the last four years to make it harder for home buyers to take on too much debt in their quest for a home.

The rule changes gradually shorted the maximum mortgage length from 40 years to 25 and also put limits on how much homeowners could borrow against their house, among other measures.

While interest rates are not expected to rise until mid-2013, the stiffer lending rules and government warnings about the high debt loads of Canadian households have helped cool the ardor of home buyers, with the hottest markets, including Vancouver and Toronto, already feeling a chill.

Sales of existing homes were down 15.1% in September from a year earlier, and were 6.5% lower in the third quarter from the previous three months, according to data from the Canadian Real Estate Association.

Prices, which lag sales, have started to come down as well. Prices for existing homes dipped 0.4% in September from August, according the Teranet-National Bank Composite House Price Index, but remain 3.6% higher than a year earlier.

Prices of new homes rose 0.2% in the month, the 18th straight monthly gain, and were up 2.4% on the year, according to Statistics Canada.

This article appeared on the Global BC website on November 8th, 2012.

OTTAWA – The pace of home building slowed in October to a softer reading than economists expected in a report by the federal mortgage insurer, providing yet more evidence of a cooling housing market.

Canada Mortgage and Housing Corp. said Thursday there were 17,507 actual housing starts last month. That translates into a seasonally-adjusted annual rate of 204,107 starts, down almost nine per cent from an annual rate of 223,995 recorded in September.

CMHC said there were drops in both single- and multiple-unit starts in urban areas last month.

Declines were recorded in all regions, with Quebec reporting the biggest drop at 16.9 per cent.

“The monthly decrease in total housing starts posted in October was mostly due to a decrease in both single and multiple starts in urban centres in Quebec and the Prairies,” Mathieu Laberge, deputy chief economist at CMHC, said in a release.

“Multiple starts also declined in many urban centres in Ontario, more than offsetting an increase in such starts in Toronto.”

Seasonally-adjusted urban starts decreased 1.5 per cent in British Columbia, 6.4 per cent in Ontario, 12.3 per cent in the Prairies, and 16.8 per cent in Atlantic Canada.

The agency, which provides mortgage insurance to home buyers and market intelligence to the real-estate industry, estimates rural starts came in at a seasonally-adjusted annual rate of 21,973 units in October.

Earlier this week, the federal Crown corporation predicted 177,300 to 209,900 of housing units will be started next year — substantially less than the forecast of 210,800 to 216,600 for 2012.

Bank of Canada governor Mark Carney said the slowdown is consistent with the bank’s expectations.

“We view household formation around 190,000 annualized and the starts are a little north of 200,000, so they’ve slowed from a very rapid pace to a pace that’s still above household formation,” Carney said in Montreal.

“We’re expecting this decreased contribution from housing relative to GDP… We’re starting to see some things that are consistent with that, so it’s entirely consistent with expectations.”

Emanuella Enenajor of CIBC WM Economics noted that “despite low (interest) rates and surprisingly resilient investor demand, housing construction looks to be struggling to attain new heights in recent months.”

“Although the housing starts data tend to be volatile month-to-month, we expect to see a trend in softening starts through 2013, as a slowdown in secondary market activity weights on homebuilding.”

The CMHC data suggests housing starts — where trends tend to lag those in the home resale market — are falling in line with home sales figures released in the last few months, which points to a broader slowdown in Canada’s housing market.

The latest figures from Canadian Real Estate Association found sales in September fell 15.1 per cent from a year earlier, due in large part to a further tightening of mortgage rules and a slowdown in Vancouver.

A real estate expert at Queen’s University called the drop in housing starts in October “significant” and said it’s “clear evidence” that the housing market is slowing down.

“(The numbers) provide sound evidence reinforcing the idea that housing markets in most regions and cities are cooling off rapidly,” John Andrew, director of the Queen’s real estate roundtable, said in a release.

“Housing starts are clearly responding to the decrease in new and existing home sales that we’ve seen in most markets over the past few months, especially for condos. I expect this trend to deepen over the remainder of 2012 and likely into 2013.”

In a global outlook released last month, the International Monetary Fund singled out housing and household debt, which currently sits at a near-record 163 per cent of income, as the key areas of concerns for Canada.

Those concerns have been voiced before, including by Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty, who has moved four times in as many years to reduce mortgage lending.

Over-saturation, high prices, high debt levels and recent tightening of mortgage rules are impacting the resale market, economists have noted, particularly in the previously torrid markets of Toronto and Vancouver.

Read it on Global News: Global BC | Housing starts fall in October with drops in all regions, CMHC says

This article appeared on the CBC.ca website on September 17th, 2012 and was written by Darren Calabrese.

Home sales declined by almost nine per cent in August even as prices ticked slightly higher, data from the Canadian Real Estate Association showed today.

The 8.9 per cent decline in activity is the largest annual drop since April 2011, CREA said, and was led by declines in major markets such as Vancouver, Toronto, Calgary, Edmonton and Ottawa.

While the number of sales declined, prices held up. CREA says the average price of a Canadian home sold in August was $350,192, up 0.3 per cent from where it was a year ago.

As it has several times in the past year, CREA warned that the national average price is being skewed by a several factors, most notably fewer sales in Vancouver this year compared with 2011.

If Vancouver activity is stripped out of the equation, the national average price has increased 3.3 per cent in the year up to the end of August.

In a separate release, the real estate group updated its housing forecast for the year. CREA now expects fewer home sales this year and next, and it predicts the average home price for 2012 as a whole will come in at $365,000, a 0.6 per cent rise from 2011’s average.

For 2013, CREA predicts a slight pullback, with prices ticking down 0.1 per cent to $364,500.