CMHC changed forecasts for housing starts in Canada for 2013, 2014

Canada Mortgage and Housing Corp. has tweaked its 2013 and 2014 forecasts for housing starts.

CMHC now expects slightly more housing starts this year and slightly fewer in 2014 than in the previous outlook issued in August.

That will result in a period of relative stability, although both years will be slower than 2012, when there were 214,827 housing units started.

The new forecast is for between 179,300 and 190,600 units this year, with a mid-point of 185,000 units.

That's up from the previous 2013 forecast of 182,800 starts - an increase of 2,200 that is almost offset by a lower forecast for 2014.

CMHC's new 2014 range is 163,700 and 205,700 units, or 184,700 at the mid-point, down 1,900 from 186,600 units in the August forecast.

Price growth next year is expected to be in line with inflation, with the average price of houses sold over the Multiple Listing Service in 2014 coming in at $385,200, compared to $378,000 this year, the Crown corporation says in its latest housing market outlook.

CMHC expects that the number of homes sold over the MLS this year will come in around 456,700, which is about the same as 2012, when 454,005 homes changed hands. It forecasts a rise in sales to 468,200 units next year, with sales rising in the first half of 2014 then moderating during the latter part of the year.

Sales have defied expectations this year. At the start of the summer nearly all economists were predicting a decline in sales for 2013, but the market has since rebounded.

Likewise, housing starts, while generally slowing, have been higher than anticipated. CMHC said Thursday it is anticipating starts to be stable next year, around 184,700 units, compared to 185,000 this year and 214,827 in 2012.

While factors such as employment growth and migration are continuing to support the housing market, "in the new home market, builders are nevertheless expected to limit the number of housing starts while inventories of unabsorbed units, completed and under construction, are drawn down," Mathieu Laberge, deputy chief economist of CMHC, said in a press release. "In the resale market, home buyers have been motivated to advance their purchases and lock-in pre-qualified mortgages given the recent moderate increase in mortgage rates. It is expected that existing home sales will increase modestly in 2014 with improving economic conditions."

It has been difficult to make accurate predictions about the Canadian housing market in recent years. The government has been taking steps to cool it off, and economists have been surprised by its resiliency.

In June CMHC was forecasting a 1.6 percent increase in average prices this year and roughly 443,400 sales.

Its current forecast for starts is also slightly higher than in June, when it expected about 182,900 units to get under way this year. bnn.ca

HOUSING STARTS DECLINE IN AUGUST BUT SALES ARE UP

Housing starts in Canada were trending at 180,291 units in August compared to 193,021 in July, according to the Canada Mortgage and Housing Corporation. 

"The trend in total housing starts continued to be relatively stable for a sixth consecutive month, remaining within a narrow range of roughly 182,000 to 188,000 units since March, 2013," Mathieu Laberge, deputy chief economist, said in a CMHC statement.

The standalone monthly seasonally adjusted annual rate (SAAR) for urban starts decreased by 5.8% in August to 163,102 units, mostly because of declines in multiple starts. They were down 8.4% to 104,704 units in August. The single urban starts registered only a slight decline of 0.9% to 58,398 units.

The seasonally adjusted annual rate of urban starts increased in Ontario, the province with more than a third of the population, and held steady in Atlantic Canada. They decreased in the other regions - the Prairie Provinces, British Columbia and Quebec.

On Monday this week, Statistics Canada reported an increase of 4.1% to C$2.2 billion for single-family dwellings in building permits issued in July by municipalities, and a 4.2% increase to C$1.9 billion for multi-family dwellings, over those issued in June. These increases occurred in six of the 10 provinces. They did not offset the 12.8% plunge recorded in June, Statistics Canada said.

Also in recent days, regional real estate boards reported increases in sales of existing homes, propelled by fears of higher mortgage interest rates coming, according to analysts and real estate agents. They ranged from 52% higher in Greater Vancouver, year-over-year, and 21% in Toronto and ranged from +30% to roughly +10% in other major urban centers.

TORONTO REAL ESTATE IN 2012

      Toronto and Canada's housing market will remain stable for at least two more years,  predicted Canada Mortgage and Housing Corp., with the expected slow growth in the economy keeping house prices in check.
      With the Canadian economy set to expand at a moderate pace and mortgage rates expected to remain low, activity levels in 2012 in both new home construction and sales of existing Toronto homes will stay close to levels seen in 2011.
       Mortgage rates will remain flat through most of 2012, CMHC predicts, and start increasing moderately in late 2012 or early 2013.
       Housing starts are expected to be around 190,000 units this year and 193,800 units in 2013, the CMHC also predicted.
       Over 2012, CMHC expects Canada's six eastern provinces will see a contraction in housing starts. By 2013, however, modest growth will return to Quebec and Ontario, they say.
       Around 457,300 existing homes are expected to change hands in 2012, moving a little higher in 2013 to 468,200 units.

Toronto real estate in January 2012

     Canadian housing starts unexpectedly retreated in the first month of 2012 as a result of considerable decline in urban single units and slowdown in multiples. The seasonally adjusted annual rate of starts decline 1 percent to 197,900 units in January from 199,900 units a month earlier, Canada Mortgage and Housing Corp. reported today. From a year earlier, Canadian dwelling starts increased 18.3 percent in January 2012 compared to a gain of 20.6 percent in December 2011.

       The pace of housing starts slowed slightly in January but remained robust during an unseasonably warm winter, according to data from Canada Mortgage and Housing Corp. Strong homebuilding activity will likely to be a boon to the Canadian economy in the short term, but could also signal overbuilding that could wreak havoc in the longer term, economists warned Wednesday.

     The seasonally adjusted annual start rate — which smooths monthly variations — was 197,900 units in January, down from 199,900 units in December, the CMHC reported. "While housing continues to surprise on the upside, we caution that this pace of homebuilding is unsustainable," said TD economist Diana Petramala.

     January's one per cent decline was mainly because of sharp decreases in Quebec and Atlantic Canada — regions that posted big gains in the month before. Builders have been able to continue construction during the winter season, which has been noticeably warmer and largely snow-free in many parts of the country.

      Low borrowing rates — tied to persistent economic uncertainty — appear unlikely to rise any time soon, which has propped up demand for homes. At the same time, home prices have risen sharply as buyers rush in to take advantage of those low mortgage rates and compete for homes, making ownership less affordable for some. Senior government officials have issued repeated warnings about the implications of taking on too much debt when mortgage rates inevitably rise.

      Still, the January report was good news for Canada's economy because the housing sector makes up a sizable portion of GDP and an influx of building has contributed to a run up in construction jobs in the latest jobs report.

      Based on the high level of building permits approved in December, construction could trend even higher in the months ahead, said David Madani of Capital Economics. "The large amount of work under construction is broadly consistent with the elevated level of construction employment as a share of total employment. This is a stark reminder of just how important strong housing investment is for the broader economy."

      The report is a good indication that housing activity will continue to support GDP growth in the first quarter of 2012, said TD economist Diana Petramala. However, overall weakness in the job market since July —the unemployment rate now sits at 7.6 per cent —could put a damper on demand later this year and the market appears to be "slightly overbuilt and overpriced," she warned.

      In line with a recent trend, January's strength was concentrated in the multi-unit, or condo sector, which has been identified as most at risk of a downturn because of a potential glut of supply that could outpace demand. Multi-unit starts increased 0.4 per cent, while single family home starts fell 7.8 per cent — their lowest level since May.

      Housing construction is outpacing the levels demanded by demographic fundamentals such as the level of new household formation — especially in the condo market. "The result has been a large over hang of newly built and unoccupied multiple units, putting significant downside risk to home building once interest rates begin to rise," Petramala said.

      Madani also said he remains concerned about overbuilding and the "rising likelihood of a housing slump down the road." Given that developers usually begin construction with only about 60 to 70 per cent of units sold, the recent strength in multi-unit starts suggests there could be a glut of newly completed, unoccupied condo units, he said. "This is just one sign of a housing investment boom that has gone too far."

      While January's figures reflect that construction is settling into a healthy pace, there were some specific regional and sectoral trends that underlie the data, BMO economist Robert Kavcic said. Most prominent of those trends is the booming Ontario market, where condo building has been strongest in the past few months, the level of multi-unit building is just slightly below the all-time high set in late 2008, he said.

      The CMHC data showed the seasonally adjusted annual rate of urban starts decreased by 2.8 per cent to 176,600 units in January, with single starts down by 7.8 per cent and multiple starts up 0.4 per cent.

Urban starts decreased by 35.4 per cent in Atlantic Canada and by 34.4 per cent in Quebec on a seasonally adjusted annual rate. Those sharp declines followed particularly robust gains in those regions in December. From GlobalEdmonton.com

Toronto real estate. JULY RESALE MARKET

     Greater Toronto REALTORS® reported 7,922 transactions through the TorontoMLS® system in July 2011, representing a 23% increase over July 2010. Total sales through the first seven months of this year amounted to 55,863 – down by 1.3% compared to the same period in 2010. After adjusting for seasonal fluctuations, the July figure continued to point to an annual sales result close to 90,000 – in line with results from the previous six months.
      “Strong home sales continued in July, with a substantial rebound over last summer’s slow-down brought about by higher mortgage rates, new lending guidelines and misconceptions about the HST. The greatest rebound was seen in the condominium apartment segment in the City of Toronto,” said Toronto Real Estate Board President Richard Silver. “If the current pace of sales holds up, we could see the second best year on record under the current TREB market area.”
      The average selling price in July was $459,122 – up by almost ten % compared to the July 2010 average of $418,675.
      “Tight market conditions have boosted the annual rate of price growth this year. However, the listings situation is starting to improve. A better supplied market later this year and into 2012 would lead to a more sustainable rate of price growth,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

       Competition from the resale market has impacted demand for new homes, comments the Canada Mortgage and Housing Corporation. With sales of newly built contemporary homes potentially suffering, the 0.3% reduction is hoped to increase interest from buyers and overseas investors.
       Despite worries that the US economic downturn may impact sales, however, there is still overall confidence in the Canadian housing market. A study from the Real Property Association of Canada, revealed yesterday in the Canadian Real Estate Magazine, has found that the country's property market is still growing, and has been for the last eight quarters.
       “The market is largely viewed as stable and attractive, which bodes well for future investment and development,” says the report.

TORONTO REAL ESTATE NEWS AND STATISTICS

Greater Toronto REALTORS® reported 4,337 transactions through the TorontoMLS® system in January 2011. This result was 13 per cent lower than the record result reported in January 2010.

The average selling price for January 2011 sales was $427,037, representing an increase of over four per cent compared to the average of $409,058 reported in January 2010.

In January, the median price was $360,000, from the $350,000 recorded during January of 2010.

Canada Mortgage and Housing Corp. (CMHC) says condos now account for a quarter of all new residential construction.

Luxury condos – priced at more than $1 million in Toronto – are up by 49 per cent year-over-year, reports Re/Max. Condos priced at more than $750,000 in Ottawa have seen sales increase by about 72 per cent compared to last year.

CMHC says that Canadians are not giving up on homeownership until after they reach the age of 75. With owners of all ages choosing the condominium lifestyle, expect to see a lot more of those building cranes in urban areas during the next several decades. 

If you have any questions about Toronto real estate, call Alexandre Malkhassiants, Sales Representative and Mortgage Specialist. Right at Home Realty Inc., Real Estate Brokerage. Office: (416) 391-3232. Cell: (416) 723-9383. E-mail: amalkhass@rogers.comWebsite: Toronto real estateWebsite: Ontario real estateBlog: Lowest Canada mortgage rates