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HOUSING MARKET OUTLOOK Greater Sudbury

Comments: 0November 9th, 2009 by admin

Posted by Moishe Alexander

The slackness in the resale market coupled with the slowing economy will directly impact the new home market. Single-detached starts will fall to 190 units in 2009 and 180 in 2010, as the market comes more into line with long-term demographic requirements. CMHC expects 210 row, condominium and apartment starts in 2009 and another 160 in 2010.

After rising 4.3 per cent and 5.5 per cent respectively in 2007 and 2008, the New Home Price Index for Sudbury-Thunder Bay will rise in 2009 and 2010 but only modestly given the slowdown in demand.

Developers have plans for condominium development in 2010. Pricing will be very important as this product is primarily targeted at empty nesters who do not typically want to pay more for a condo that what they obtain from the sale of a homeownership unit.

As is well known, the vacancy rate has fallen from a peak of 11.1 per cent in 1999. A tight market partially brought on by a lack of new rental construction and demand pressure has finally resulted in some development of rental housing in Greater Sudbury. Vacancy rates rose slightly in April and will also increase this October before falling again to 1.3 per cent in 2010 as the economy begins improving. Strong enrolment figures at the three Sudbury-based post-secondary institutions will contribute to the tight market conditions. Rents should continue to escalate in 2009 and 2010 given continued strong demand for rental accommodation.

After plateauing in 2006-2007, Sudbury sales fell 13 per cent in 2008 and have fallen a further 26 per cent to the end of September. Sales will certainly continue this downward trend in 2009. Given the buyer’s market conditions, CMHC estimates a 27 per cent drop in existing home transactions when the year is complete. Sales will drop a further six per cent in 2010 as the market moves towards a balanced position.

The sale to new listings ratio, an indicator of the existing home market behaviour, is improving. After growing in the third quarter, Sudbury’s market will keep an upward trend, increasing its temperature. CMHC expects this ratio to end the year approaching 50 per cent, indicating that prices will adjust all the way into next year.

According to local sources, demand is greatest in the price ranges under 200,000 while the upper end of the market (>$400.000) has not been greatly affected. Prices have been falling since mid-year 2008 after rising to unsustainably high levels over the prior four years. The price decrease will continue into 2010 but will be tempered by falling listings. Watch for average prices to fall 5.5 per cent in 2009 and level off in 2010.

Given the adjustment in home prices, there has been improvement in required income to purchase a home. Unfortunately, with the slowing economy, the adjustment to incomes has been stronger. As a result the net impact on affordability will decrease somewhat in 2010 after improving in 2009. Nonetheless, there are buyers in the market searching for lower priced homes.

Greater Sudbury has experienced a strike at Vale Inco, one of the biggest mining companies in the community. Consequently employment will decline 1.2 per cent in 2009 and recover only slightly, 0.5 per cent in 2010. The combination of job loss and labour force growth have caused the unemployment rate to head north, and will approach on average nine per cent this year and next.

After an increase of nearly nine per cent in 2008, average weekly earnings will drop this year declining three per cent and fall a more modest 0.5 per cent in 2010. Removing a relatively high proportion of mining and mining- related incomes from the mix would have had a downward impact on average weekly earnings over the course of this year.

In the short term local economic uncertainty will impact housing demand. However, the current commodity price rebound will form a solid long term foundation for growth in the broader Sudbury economy. Despite the current weakness in the Sudbury economy, some economic development plans are still moving ahead.

Migration has been positive of late, while natural increase is trending down. In-migration will trend downward in 2009 and 2010 prior to recovery in 2011. Mining workers affected by work stoppages may contemplate relocating if the national economy begins to improve, generating opportunities elsewhere.

The Bank of Canada cut the Target for the Overnight Rate in the early months of 2009. The rate was 1.50 per cent at the start of 2009 and has since fallen to 0.25 per cent. The Bank has committed to keeping this rate at 0.25 per cent through the middle of 2010 unless inflationary pressures warrant an increase.

Mortgage rates have fallen over the course of 2009, but are now expected to remain relatively stable for the rest of the year. Posted mortgage rates will gradually increase through 2010, but will do so at a slow pace. For 2010, the one-year posted mortgage rate will be in the 3.50-4.25 per cent range, while three and five-year posted mortgage rates are forecast to be in the 4.50-6.00 per cent range.

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Posted in CMHC, Canada, New Home Starts, Sudbury

In-Migration to Support Housing Market

Comments: 0November 3rd, 2009 by admin

Posted by Moishe Alexander
In-migration and low mortgage rates will lend strength to the housing market this year and next. Residential construction is expected to rebound in 2010 following declines in 2009. Economic recovery is expected to take hold in 2010 and result in a moderate rebound in growth following a contraction in the provincial economy in 2009. Overall, the provincial economy is faring better than many other areas of the country. This is due in part to the province’s efforts at diversifying the economy away from the traditional industries of agriculture and tourism. One of the key growth areas for the local economy has been in the technology sector, particularly in aerospace, which recorded increases in both sales and employment in the first part of 2009. This is helping to offset the declines seen in some of the traditional sectors so far this year. Through the first half of 2009, the number of international tourists visiting PEI has dropped and demand for shellfish continues to be weak. The one bright spot in the agricultural sector has been potato products, which have been strong, based on export values. The local economy is also getting a boost from various government stimulus programs.

Employment in the Charlottetown area is forecast to post a slight decline this year before posting a moderate increase in 2010. During the first three quarters of 2009, the decrease in employment in Charlottetown was dispersed among all industries except the public service sector, which posted a small increase. Despite the modest declines in employment in 2009, the capital region remains attractive for job seekers compared to other parts of the province. This fact has lead to the continued trend of urbanization, as Islanders continue to move to the capital region from more rural parts of the province.

Positive net-migration is one of the key factors that has contributed to the strong housing market over the past seven years. As of July 2009, the population of Prince Edward Island was estimated at 140,985; an increase of 1,534 persons or 1.1 per cent from 2008. While this increase in population was the result of both a natural increase and positive net migration, the vast majority was the result of the latter. From July 2008 to July 2009, 1,793 international immigrants chose the Island as their new home, which is the highest annual level since recording began in 1971. The main reason for this substantial increase in international migration was the increased effort that the province has allocated to this initiative. The results seen in 2007 and 2008 are expected to be the start of a new upward trend in international migration with preliminary data for 2009 indicating that the year could end up showing an even larger inflow of people. The local housing market is benefitting from this initiative as many of these households are relocating to the capital region, and as such require housing within all tenure types. While the aforementioned data

While the aforementioned data on immigration is positive, it is for the province as a whole. It is important to note that the capital region consistently outperforms the province. For the last census period ending in 2006, the Charlottetown CA, which encompasses the entire urban area around the city, recorded a population growth of 1,391 people or 2.4 per cent. While there was some natural population growth during this period, the majority of the increase was due to in-migration. For the Charlottetown area it had been typical that about 70 per cent of the people moving to the capital region came from elsewhere in the province, while the remainder were from other regions of the country. This ratio had remained fairly constant since the early 1990′s, but since 2006 it has started to change. The reason for this is twofold, with both the movement of people to the west and the recent influx in international immigrants. As earlier referenced, the influx of international immigration is expected to end up being even stronger in 2009 than 2008, due to the popularity of the province’s programs with new immigrants. This will especially benefit the capital region as the majority of the people are settling in the area. This trend should continue to bolster the local housing market over the forecast period, as the population continues to grow.

As a result of the aforementioned market forces, the Charlottetown housing market is expected to exceed the level set in 2008. Although single starts in Charlottetown recorded a decline so far in 2009, multiple starts at the end of the third quarter are on track to have the strongest year since 1988. Single starts are expected to decline 25 per cent in 2009, when compared to 2008. This decline was expected, as many potential homeowners are taking a wait and see approach, before making any large purchases. In addition, single home construction in Charlottetown posted seven years of impressive growth that mirrored the national trend. As such, the decline in 2009 is seen as the market returning to a more sustainable level. In contrast to the decline in singles, multiple starts will end the year close to setting a new record high. The strength in multiple starts is the result of several factors. The increase in multiple unit starts also created a situation where there was a temporary oversupply of rental units that was not fully absorbed until the end of 2007. However, one area where new construction has continued to remain strong is multiple units intended for homeownership. A key reason for the increased activity in this part of the market is the relatively lower cost of semi-detached and row units compared to single-detached homes. Despite the forecasted increase in semi-detached units over the next two years, it is expected that the overall housing market will remain strong during the forecast period. The Bank of Canada cut the Target for the Overnight Rate in the early months of 2009. The rate was 1.50 per cent at the start of 2009 and has since fallen to 0.25 per cent. The Bank has committed to keeping this rate at 0.25 per cent through the middle of 2010 unless inflationary pressures warrant an increase.

The Bank of Canada cut the Target for the Overnight Rate in the early months of 2009. The rate was 1.50 per cent at the start of 2009 and has since fallen to 0.25 per cent. The Bank has committed to keeping this rate at 0.25 per cent through the middle of 2010 unless inflationary pressures warrant an increase.

Mortgage rates have fallen over the course of 2009, but are now expected to remain relatively stable for the rest of the year. Posted mortgage rates will gradually increase through 2010, but will do so at a slow pace. For 2010, the one-year posted mortgage rate will be in the 3.50-4.25 per cent range, while three and five-year posted mortgage rates are forecast to be in the 4.50-6.00 per cent range.

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Posted in CMHC, Canada, Housing Market, New Home Starts, Ontario, affordable housing, moishe alexander

New Homes Market

Comments: 0November 3rd, 2009 by admin

Posted by Moishe Alexander

New Home Construction Not as Robust as Before New home construction in Barrie will come in at a lower tally than last year. Single-detached homes will continue to make up the majority of a smaller new construction pie. Next year, new construction will increase from this year, as the economy begins to improve. From 2010 to 2013 new housing construction will grow at a relatively subdued level. With less demand for new housing, the average price of a newly constructed single- detached home will decrease.

The number of new housing starts is expected to come in significantly lower this year than last year’s total tally. Total starts in Barrie Census Metropolitan Area (from here on referred to as CMA) will come in at 340, less than a quarter of the homes built in 2008. Next year total starts will begin to improve and come in at close to 390 units. Currently, the number of homes under construction and inventories of new unsold homes are both declining. Consequently, improving demand next year will translate into starts fairly quickly.

Even though apartments, and to a lesser degree row homes, are expected to be significant components of all new construction in the CMA, single-detached homes will continue to be the most preferred type of housing built in Barrie. Single- detached starts will make up close to 61 per cent of all new construction this year in the CMA while apartments will make up close to 27 per cent and row homes 12 per cent. Looking forward, the recovery is expected to be slow. With lower new housing demand, as a result of the economic downturn, and the slow recovery, the average price of a new single-detached home is expected to drop from last year and finish this year at $340,000 a drop of five per cent. In 2010, as recovery strengthens the average price of a new single-detached home will be negative but by a much lesser margin than this year. Resale Homes Market Resale Market Relatively Unscathed by Downturn homes market will fare better this year.) The SNLR (Sales-to-New- Listings-Ratio) will remain near the upper bound of balanced market territory. The average price of an existing home will grow modestly this year and at the rate of inflation next year. Housing affordability will deteriorate slightly as modest price growth and increasing mortgage rates raise monthly carrying costs. In spite of the slight deterioration in affordability, the Barrie CMA will remain an attractive housing market when compared to other urban centres.

Both sales and new listings of existing homes will lose some strength from last year.(In comparison to the new homes market though, the existing homes market will fare better this year.) The SNLR (Sales-to-New- Listings-Ratio) will remain near the upper bound of balanced market territory. The average price of an existing home will grow modestly this year and at the rate of inflation next year. Housing affordability will deteriorate slightly as modest price growth and increasing mortgage rates raise monthly carrying costs. In spite othe slight deterioration in affordability, the Barrie CMA will remain an attractive housing market when compared to other urban centres.

Similar to the new home market, the resale home market will also feel the effects of the economic downturn. This year total existing home sales will end the year close to 3,900, a drop from last year of five per cent. In 2010, existing home sales will decrease slightly once again but by a lesser amount than this year as the market will begin showing signs of recovery and stabilization.

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Posted in CMHC, Ontario, affordable housing

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