Posts Tagged ‘reduction’

« Older Entries

HOUSING MARKET OUTLOOK Greater Toronto Area

Comments: 0November 5th, 2009 by admin

Posted by Moishe Alexander

The new home market in the Greater Toronto Area (GTA) will see sales activity rise slightly this year in comparison to 2008. The low-rise housing segment will be credited for the increase in sales in 2009 while the high-rise sector will outperform in terms of sales growth next year. Total new home sales will reach 28,500 units this year and remain steady at 29,000 in 2010 — well below the annual average for the new millennium.

For the first time since 2006, low-rise homes will account for the majority of new home sales in the GTA in 2009 and 2010. New low rise home sales will rise by 37 percent this year to 17,000. Although this level is still well below the high reached in 2002, it represents a complete turnaround from last year when sales dropped by over 40 per cent. Low borrowing costs this year are a clear contributor to the rebound in low-rise sales, as is a lack of supply in the resale market. A rise in new listings in the resale market and a reduction in affordability next year will dampen demand for new single-detached homes in the second half of 2010. Total low-rise home sales will move lower in 2010 to 15,500 units — still above the 2008 level. Strong sales for singles in the first part of next year coupled with stable demand for less-expensive semi-detached and row houses throughout 2010 will provide some support for the low-rise segment.

A tougher selling environment for high-rise homes will lead to a sales decline of 23 percent this year to 11,500 units — the lowest level since 2003. More project launches, an improving employment situation for younger workers and a shift towards lower-priced housing types in the second half of next year will boost new high-rise sales in 2010 by 17 percent to 13,500 units. Construction delays and a heightened sense of uncertainty regarding new condominium projects this year has turned buyers away from pre- construction sales offices. At the same time, less project launches have created fewer new options for buyers. Faced with high levels of inventory relative to demand, developers have begun offering generous buyer incentives and reconfiguring remaining units to attract more sales centre traffic. Sales levels have responded and are now much higher than at the beginning of the year. Still, sales are down by over 40 percent in the year-to-date to August and even with further improvement will register an overall decline in 2009. However, current sales momentum will carry into 2010, leading to a much better performance for 2010.

Tags: , , , , , , , , , , , , , , ,
Posted in CMHC, Canada, Ontario

NEW HOME MARKET

Comments: 0November 5th, 2009 by admin

Posted by Moishe Alexander

Following a 56 per cent decline in 2008, total housing starts across the Edmonton Census Metropolitan Area (CMA) are on pace to decrease by another 24 per cent this year to 5,000 units. This will represent the lowest level of activity for the region’s home builders since 1997. While single- detached construction has staged a modest recovery since the summer, a continued downturn in the multi- family sector will hold down this year’s numbers. In 2010, a sustained improvement in single starts combined with a moderate rebound in multiples will boost total starts by 29 per cent to 6,450 units. While representing a sizable gain over this year’s volumes, total starts next year remain a fraction of the 10,600+ units started on average during the 10 year period 1999-to-2008.

Single-detached starts increased by 14 per cent during the first nine months of 2009 but the improvements have come on gradually as the year has progressed. Activity levels were down by 39 per cent year-over-year at the end of the first quarter but have generally exceeded last year’s production since then. Price reductions, various incentives, and low mortgage rates have helped to bolster demand in 2009. This trend should continue for the balance of 2009, with annual production nearing the 3,200 unit mark. This will represent an increase of 22.5 per cent over 2008 but will still be well below activity levels reported over the past decade. Look for these gains to continue in 2010, with single starts of around 4,200 units. The tepid outlook for employment growth will temper the rate of increase going into 2010. Inventory levels, including show homes, peaked in August 2008 and have been trending downward throughout much of the past year. As shown in Figure 2, the show home component of inventory has started to move upward as builders ramp-up marketing efforts. The inventory of complete and unabsorbed spec homes, meanwhile, has trended to its lowest levels since September 2006.

Statistics Canada’s New House Price Index (NHPI) is forecasted by CMHC to decrease by 10.5 per cent this year before staging a two per cent improvement in 2010. These price changes have begun to show up in CMHC’s market absorption surveys but the overall average absorbed price has held up surprising well in 2009. To the end of August, the average absorbed price increased this year nine per cent to $545,327. While units priced under $400,000 and over $600,000 have gained market share this year, mid-range product selling between $400-600,000 lost ground compared with last year.

CMHC forecasts an average absorbed single-detached price this year of close to $535,000, for a 4.5 per cent gain over 2008. The expected median value will be much lower as the impact of high-priced homes is less using this measure. In 2010, the absorbed average price will soften due to the lagged effect of when homes are priced (often before construction begins) and when they are captured in our survey (which is at completion). The pressure for higher negotiated selling prices will come from builders who had trimmed their margins over the past year in order to clear their unsold inventory. With better economic times ahead, land and labour costs as well as material prices such as lumber and concrete are expected to increase.

Tags: , , , , , , , , , , , , , , , , , ,
Posted in CMHC, Canada, Ontario, affordable housing, moishe alexander

Housing Starts

Comments: 0November 5th, 2009 by admin

Posted by Moishe Alexander

Total housing starts are on pace to decline 52 per cent in 2009, reaching 5,550 units. This would represent the lowest level of activity since 1991. A bulk of the reduction in total housing starts is stemming from the multi-family market, where inventory levels remain elevated. As economic and housing market conditions improve, home builders are forecast to increase production by 21 per cent to 6,700 units in 2010.

Single-detached starts have rapidly improved since the beginning of the year when builders cut production in response to lower sales and rising inventory. After the first half of the year, starts were down 33 per cent, though solid gains since June have lessened the decline. Despite the increased starts activity in recent months, this resurgence will not offset the lower production earlier in the year. Single-detached starts in 2009 are on pace to decline four per cent to 4,200 units compared with 4,387 units in 2008. As inventories have declined and sales have increased, new construction of homes is expected to pick-up throughout the forecast period. Single-detached builders are anticipated to increase production by 17 per cent in 2010, with 4,900 units breaking ground.

Lower mortgage rates and builder incentives have supported new home sales, and there has been less competition from the resale market. The inventory of complete and unabsorbed units also peaked at the beginning of 2009 and has since been on the decline. Total supply, which is units in inventory and those under construction, has been reduced to a level not experienced since 2001. With a low level of supply and improved demand, building intentions and construction activity is on the rise. In June, July, and August, building permits were up on average by 59 per cent over the same period in 2008. Single starts in the third quarter have increased 45 per cent above the previous year, following 10 consecutive quarters of year-over-year declines. More spec homes are also breaking ground. At the beginning of 2009, less than five per cent of homes under construction were spec units. In August, however, spec homes under

year when builders cut production in response to lower sales and rising inventory. After the first half of the year, starts were down 33 per cent, though solid gains since June have lessened the decline. Despite the increased starts activity in recent months, this resurgence will not offset the lower production earlier in the year. Single-detached starts in 2009 are on pace to decline four per cent to 4,200 units compared with 4,387 units in 2008. As inventories have declined and sales have increased, new construction of homes is expected to pick-up throughout the forecast period. Single-detached builders are anticipated to increase production by 17 per cent in 2010, with 4,900 units breaking ground. Lower mortgage rates and builder incentives have supported new home sales, and there has been less competition from the resale market. The inventory of complete and unabsorbed units also peaked at the beginning of 2009 and has since been on the decline. Total supply, which is units in inventory and those under construction, has been reduced to a level not experienced since 2001. With a low level of supply and improved demand, building intentions and construction activity is on the rise. In June, July, and August, building permits were up on average by 59 per cent over the same period in 2008. Single starts in the third quarter have increased 45 per cent above the previous year, following 10 consecutive quarters of year-over-year declines. More spec homes are also breaking ground. At the beginning of 2009, less than five per cent of homes under construction were spec units. In August, however, spec homes under

The New Home Price Index (NHPI) has started to stabilize, after declining from its peak in the first quarter of 2008. In the first seven months of 2009, the NHPI was down on average of 7.7 per cent, compared to the same period a year earlier. A majority of the decline is attributed to the house component, as reduced construction activity has taken pressure off input costs such as labour and materials. Land costs are down slightly from a year ago, but for the most part lot prices have held firm. By the end of 2009, new home prices are anticipated to gain more ground and the NHPI will end the year down by an average of 6.9 per cent from the 2008 average level. In the face of higher starts, stability in new home prices is expected to improve into 2010 with the NHPI increasing two per cent. The monthly absorbed average price of a new home has declined since 2008 and appears to be leveling at around $535,000. The average price in August was $534,954 and in September was $537,225, down year-over-year by eight and ten per cent respectively. Readers should note that the absorbed price reflects units absorbed in a given month, which is not necessarily the month when the price was negotiated. The average absorbed price is forecast to fall from $581,800 in 2008 to $560,000 in 2009. With stronger demand conditions and more manageable inventory levels expected for the balance of 2009 and throughout 2010, the average absorbed price is anticipated to increase modestly. Despite the month-over-month gains projected for 2010, it will not be enough to push the yearly average above 2009 levels. In 2010, the average absorbed price will decline 1.4 per cent to $552,000.

Tags: , , , , , , , , , , , , , ,
Posted in CMHC, Canada, Housing Starts, moishe alexander

« Older Entries