Low Mortgage Rates Encourage Home Buyers

Housing market to improve in 2010: CMHC forecast

OTTAWA - Canada's national housing agency has upgraded its forecast for the new-housing market next year on the grounds that low mortgage rates will continue to make home ownership affordable, the economy will be better that previously thought and there will be a spillover effect from the surging resale market. Housing starts are forecast to reach 141,900 in 2009 and rise to 164,900 next year, the Canada Mortgage and Housing Corp. said Monday in its quarterly outlook. This year's forecast is unchanged from the previous one issued in September, but expectations for next year's numbers increased from about 150,000. Such levels still pale to 2008's final tally of 211,056, which marked the seventh straight year of more than 200,000 housing starts. Bob Dugan, chief economist at CMHC, said the earlier part of this decade was an "exceptional period," that is unlikely to be matched in the foreseeable future He explained that average new-household creation in Canada runs at about 175,00 annually, and the elevated rate of housing starts seen between 2002 and 2008 was not sustainable for the long term given that reality. Dugan said by 2011 or 2012, housing starts should be close to equal with the household-creation rate. To show how far the new-housing market has come this year, Dugan pointed out how the annual rate of housing starts went as low as 118,500 in February and rose to about 150,000 in recent months. "That's a pretty good improvement (but) not as good, though, as the improvement we've seen on the existing-home market," Dugan said. He said between January and September of this year, the rate of monthly existing-home sales has increased about 63 per cent on a seasonally adjusted basis. As the resale market turned from a buyer's market to a seller's market, Dugan said home builders got some of the buyers who couldn't find what they wanted among existing homes. Listed home resales are expected to reach 441,300 units this year and increase to 445,150 units in 2010, CMHC said in its report. Both figures are up from 2008's result of 433,900. The average price for existing homes is forecast to be $312,950 this year and $324,500 in 2010, the agency said, up from $303,607 in 2008. Regionally, British Columbia, Alberta, Saskatchewan and Ontario are expected to post the sharpest year-to-year declines in housing starts this year. Dugan said these provinces have more volatile housing markets, and their gains in other recent years were more pronounced than elsewhere in the country. But Dugan added that these places are also anticipated to recover more strongly in 2010 than regions such as Quebec and Atlantic Canada, where the housing market was less damaged by the economic downturn this past year.