Soft landing expected for housing market, CMHC says
163,000 to 203,200 homes expected to be built in 2015, below 2014 pace
Morgan Graham – CBC News
Canada’s national housing agency says it expects builders to stop making as many new homes and focus on selling the ones they’ve already built.
Comment: But builders don’t tend to build until their units are sold. They don’t build them and then sell them, that is not the way it works. Not the way it has ever worked. Yet the media gets it wrong EVERY TIME. Makes me think they do it on purpose…
The Canada Mortgage and Housing Corporation’s latest quarterly forecast predicts lower sales volumes for 2015, with 163,000 to 203,200 homes expected to be built. The lower end of that forecast is below the 179,600 to 189,900 new homes expected by the end of this year.
Comment: And the higher end is higher, so what? Nice cherry picking!
The low end of that range is itself a slowdown from 2013, when 187,923 new Canadian homes were built.
Comment: And the high end is higher. Both for 2014 and 2015. You can’t just focus on one end of a range, that is why they give a range.
Add it all up, and the housing agency calls for a “soft landing” in housing — a term used by economists to describe a housing market that slowly cools down without ever experiencing a jarring, sudden large drop in prices, sales or new builds.
Prices will tick higher
“Recent trends have shown an increase in housing starts, which is broadly supported by demographic fundamentals. However, our latest forecast calls for starts to edge lower as builders are expected to reduce inventories instead of focusing on new construction,” CMHC economist Bob Dugan said.
While construction is expected to slow slightly, prices are expected to rise.
CMHC’s point forecast for homes predicts a 4.5% gain to $399,800 in 2014 and another increase of 1.8% gain to $406,800 next year.
Comment: But the average Canadian house price already hit $401,585 in July. Guess those estimates are at the low end too, eh?
Just as prices are expected to inch higher, so too does the agency expect sales volumes to tick up.
Comment: Wait what? We are expecting prices AND sales to rise, yet call that a soft landing? Huh?
CMHC expects approximately 463,600 Canadian homes to be sold this year, and 474,300 units next year. Both figures are slightly above the 457,338 homes sold last year.
Regional outlook
In all regions across Canada, the CMHC does not expect significant new home construction growth next year.
In Ontario, construction will slow to 57,100 new units in 2014 before steadying the following year. Meanwhile, home sales are expected to rise from 197,900 units in 2014 to 202,500 units in 2015.
CMHC’s senior market analyst, Alex Meadow, says an improving Ontario economy means fewer people will leave the province to go west, and instead will stay home and buy houses.
“An improving economy by 2015 and less out-migration to Western Canada will provide support to the broader Ontario housing market,” he said. “As home prices continue to rise, albeit at a more modest pace, demand will shift to less-expensive housing both by type and geography.”
On the flip side, as fewer people head west to the Prairies, that’s going to have an effect on the housing market there. The CMHC expects construction in the region to slow next year to 50,800 after increasing to 52,900 homes this year.
In Quebec, moderate economic and employment growth will limit demand for homes this year and next. The housing agency expects construction to start on 38,400 new homes in 2014 and 38,700 in 2015.
Building in Atlantic Canada paints the bleakest picture. With more migration out of the region, and a slump in economic growth, construction may drop nearly 14% in 2014 and another three% in 2015.
Despite fears of a looming real estate crash, Jeff Cheng, a realtor with Tradeworld Realty Inc., says he sees no indication of a market bubble. “Real estate markets are cyclical by nature, but I think for a bubble there has to be an irrational supply. And I don’t think we have reached that point.” He points to employment, immigration and interest rates supporting demand.
“Certainly Toronto and Vancouver have experienced balloons in pricing, but a soft landing makes sense to me,” Cheng said.
Comment: No, there is no balloon, nor bubble, in Toronto.
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Contact Laurin Jeffrey for more information – 416-388-1960
Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.
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