The slackness in the resale market has directly impacted the new home market as has the slowing economy. Single-detached starts will fall to 160 units in 2009 and 170 in 2010, as the market comes more into line with long term demographic requirements. CMHC expects 30 row, condominium and apartment starts in 2009 and another 55 in 2010. Relatively tight rental market conditions and reasonable take up of condominium units will result in some of this activity over the next 18 months.

As Figure 2 indicates, there has been improvement in household incomes in Thunder Bay and with required income being more or less flat, affordability has improved. Next year, with home prices and incomes rising modestly, homeownership should remain an affordable option and therefore demand should strengthen slightly.

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.

Vacancy rates have come down steadily since 1998 in Thunder Bay while two bedroom rents are the lowest amongst other centres in Ontario. Lack of new supply and healthy demand due to strong enrolment numbers at Lakehead University and Confederation College contribute to the demand picture, not-to-mention in-migration from Northwestern Ontario from retirees and education and/or job seekers. CMHC expects the vacancy rate to fall again in 2009 to 1.6 per cent before increasing to 2.0 in 2010 as resale market activity picks up bringing households out of rental housing into homeownership. Rents should escalate in 2009 and 2010 given continued strong demand for rental accommodation.

Developers have plans for condominium in 2010 and beyond. A steady supply condominium units coming onto the market over the last twenty years has given Thunder Bay a nice mix of housing. This type and tenure of housing gives the city some allure, especially as empty nesters from the region look to retire to this city. 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 than what they obtain from the sale of the family home or other homeownership unit.

After hitting a record high in 2008, Thunder Bay sales have fallen 18 per cent in 2009. July was the only month to register a year-over-year increase in sales. Sales will fall twenty per cent in 2009 and CMHC estimates a relatively small six per cent increase next year to 1,400 sales. Expect a gradually improving economy as low mortgage rates will positively impact the market next year.

The shortage of active listings in the Thunder Bay existing home market will exert pressure on prices. Although sales are still reasonably solid given last year’s all-time record in the Thunder Bay market, the sales to active listings ratio is unquestionably in a strong balanced to seller’s market position. The supply- demand relationship will cause price appreciation to continue barring some unforeseen economic shock. Watch for average prices to rise four per cent in 2009 and another four per cent in 2010.

With some 1,850 new homes expected to be started in both 2009 and 2010, new home construction is expected to remain relatively stable. This is mostly due to a weak rebound of single-detached home construction,which is expected to increase by only 50 units from the 2009 level.

The weak rebound in single-detached home construction is mostly due to competition from the resale market, especially from the nearly new category (homes of 1-5 year vintage). Strong growth in new single-detached home construction before 2006 created a large stock, and some of them are being offered for sale in the resale market. These homes are very popular among doctors, nurses or other health care or natural sciences related professionals. During the past few years, they tended to purchase new from builders because the resale market was tight. However, with a larger offering of nearly new homes on the market, they tend to find what they want in the resale market. With listings of resale homes expected to remain high, these professionals will tend to purchase from resale than directly from builders.

There are reports that some builders may be building up inventories in order to better compete with the resale market, by being able to have homes ready for customers to move into as soon as the transaction closes. However, at the end of September, the level of completed and unabsorbed homes dropped to 99 units, down from nearly 200 units earlier this year.

Apartment construction will be relatively strong in 2009 and 2010. Overall apartment starts will reach 850 units in 2009, and 800 units in 2010.Many of them will continue to be in the high-end rental category. Empty nesters and retirees who like the convenience of an apartment lifestyle are the key customer group for these apartments.

Condominium apartments are also becoming a factor in the London housing market. The popularity of high-end rental apartments among empty nesters and retirees has resulted in some showing interest in ownership. Developers are beginning to build high rise condominiums to satisfy this demand.

The St. John’s area housing market has been driven by a timely blend of resilient consumer spending, large capital projects and improved employment, which have resulted in reducing out-migration and continued population growth. Despite the recent global economic uncertainty, strong fundamentals have, and will continue to support demand for housing throughout the remainder of 2009 and in 2010. Accordingly, growth in the local housing market is expected to continue. The buoyant local renovation sector will be stimulated by the home renovation tax credit. Also, historically low mortgage rates have reduced the cost of borrowing, but some buyers remain sensitive to the considerable price growth that has occurred in this market. Personal income growth has been aided by wage gains and tax cuts and this income growth has offset higher house prices somewhat and will continue to provide support to housing starts in 2010. Overall, the positive outlook for the St. John’s area housing market will be reinforced by favourable trends in demographic and economic fundamentals, as well as consumer spending and on-going economic momentum supported by a lengthy list of major capital projects.

Despite the global economic situation over the past year, several planned and realized major capital projects continue to inject stimulus into the local economy and contributed to increased resiliency on the part of consumers. Consumers, a key component of economic growth in 2008 through related spending on retail, auto and housing activity, have been more cautious in 2009, but still remain positive overall, as spending activity continues to show growth. However, natural declines in offshore oil production will dampen GDP growth this year and next. During 2008, oil production declined nearly seven per cent over 2007 levels. This year, oil production is expected to decrease 21 per cent, with declines at all three producing oil fields. Weaker offshore oil production will dampen growth over the 2009 to 2010 period, although increased royalties received by the province will contribute to economic growth. Weak commodity prices have resulted in decreased and/ or suspended mineral exploration and mining extraction activity in the interior region of Newfoundland, as well as Labrador this year. However, global resource prices have begun to rise again, which will add to economic growth in 2010. Coming off the heels of real GDP growth of 7.9 per cent in 2007 for NL and additional growth of 1.8 per cent in 2008, expect a 3.8 per cent decline in 2009 real GDP, led by lower oil, mineral and newsprint exports. A two per cent rebound in economic growth is expected in 2010.

With record sales posted during the past several years, the St. John’s area resale market is expected to cool slightly in terms of total unit sales. Accordingly, the forecast calls for MLS® sales of 3,450 units this year, down ten per cent from 3,835 in 2008, with 3,575 sales expected in 2010. With many newly built homes now selling through the MLS® system, healthy residential construction activity will continue to have a positive impact on total MLS® sales. Unprecedented housing market activity in 2008 favoured sellers, with a market characterized by above average unit sales, very low available inventory and 20 per cent average price growth. However, throughout this year, the market has favoured buyers. A marginal downward trend in sales has resulted in more inventory, whilprices have continued to advance. In fact, active listings or inventory have trended 33 per cent higher in 2009 compared to last year. With demand expected to cool only slightly over the forecast period, unit sales will remain historically strong, but will noexceed recent record levels. While increasingly favourable for buyers, weaker resale market conditions have proved challenging for some sellers, resulting in fewer offers on higher priced listings, with offers often significantly below list price. With increased inventory available tchoose from, many buyers have farewell in their search for an existing home this year and in some cases, people are being swayed away from the higher-priced new home market. The growing new versus existing house price premium has resulted in increased first-time buyer activity within the lower-priced resale market and this trend will likely continue, with prices expected to head higher.

Home sales will continue at a brisk pace through the remainder of this year and into 2010. More sales combined with fewer active listings will push the average MLS® home price higher in 2010.

Home starts will pick up over the next 15 months, but remain below levels recorded in recent years. The upturn in the resale market will contribute to an increase in home starts as builders see demand returning to the market. New and resale home inventories are being absorbed, providing an incentive to start new residential projects.

Steady population growth through migration, an improving job market and low mortgage rates will provide support for homeownership demand through 2010.

Housing market conditions in Greater Vancouver1 will favour home sellers into the first half of next year. The recovery of home sales that began during the spring and summer months will continue into 2010. Home sales ramped up during the past few months due to lower home prices and low mortgage rates. These two factorscombined with increasing real wages, have meant improved affordability for home buyers. While home prices are rising, continued low mortgage rates into mid 2010 will keep home buyers active. Home sales in the first few months of 2010 may be below average, as transportation route changes associated with the Olympic Games hamper mobility.

The number of active resale listings will be near the five-year average level next year. After peaking in fall 2008, active listings have trended lower. While the flow of new listings entering the market has been increasing, high sales levels have kept the total stock of active listings dwindling in recent months. The recent upturn in home prices may draw more sellers to the marketincreasing the supply of homes for sale. Look for more balanced market conditions to prevail in the second half of 2010.
Home prices in most Vancouver

municipalities will continue to trend up in 2010, but at a modest pace of two to four per cent. Home prices hit their lowest point in March of 2009, having fallen 17 per cent from their peak level. In just six months, thaverage price in Greater Vancouver saapproximately two per cent below thpeak value. However, the recovery in home prices has been uneven across the region. While prices in the City of Vancouver have already surpassed the previous peak, prices in other centres remain well below peak levels(see figure 2). These centres with prices still below peak, will see prices trending up over the next 15 months, as buyers take advantage of lower prices and favourable mortgage interest rates.

Winnipeg - Credit jimj_wpg, Flickr

Winnipeg Manitoba has had a serious decrease in housing starts and is returning to the historical low levels of housing starts of years gone by and the housing starts are down 15%. CMHC is forecasting 2,875 units single-detached starts, 25 semi-detached units, 15 apartment condominium ownership units, and 20 apartment rental units, for a total of 2,935 housing starts for 2008. This will decrease by 700 units in 2009.

SINGLE-DETACHED FORMS OF HOUSING POISED FOR ANOTHER STRONG YEAR

This year Canada Mortgage and Housing Corporation predicts that Winnipeg will surpass the housing start levels of 2006, and 2007 but pouring more than 1,925 foundations. However, in 2009 Canada Mortgage and Housing Corporation predicts that there will be only 1,850 single-detached homes started. A modest 4% decrease from 2008.

WINNIPEG’S RESALE MARKET WILL BE MODERATE

Canada Mortgage and Housing Corporation states in its outlook report that after 6 years of consecutive double-digit price growth, the resale market in Winnipeg will balance itself off in 2009. In 2007, the average MLS price for a detached home is currently $200,000.00 in 2008 and we will see a 4% increase in 2009, to push the resale average price to $208,000.00.

WINNIPEG MOVING TO BALANCED MODERATE MARKET

As Winnipeg has experienced substantial price growth over the past 3 years, Canada Mortgage and Housing Corporation predicts that there will be continued but moderate growth in 2009. However, in major commercial projects there will be over $7 billion worth of projects that are commencing in 2009 for Winnipeg and the surrounding areas, concentrated in Winnipeg.

MORTGAGE RATES

Canada Mortgage and Housing Corporation predict that interest rates will decline by a further 25-50 basis points from their current levels in 2009. However, due to the cost of borrowing to the Canadian banks from the markets, the mortgage interest rate will marginally increase in the latter half of 2009, but not significantly enough to negatively affect the housing market in Winnipeg and surrounding areas.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64363/64363_2008_B02.pdf

The Big Nickel in Sudbury, Ontario - Credit "Smith", Flickr

Sudbury Ontario has had a serious increase in housing starts and is rising above the historical low levels of housing starts of years gone by. CMHC is forecasting 525 single-detached starts, 30 semi-detached units, 40 apartment condominium ownership units, and 120 apartment rental units, for a total of 715 housing starts for 2008. This will increase by 600 units in 2009.

DENSER FORMS OF CONSTRUCTION EXPECTED

CMHC expects the with a vacancy rate under 1% and no publicly assisted rental housing starts in the year 2008 or 2009, the type of new construction for new homes will be the low density form of housing, which will be the dominant type of new housing starts in the Greater Sudbury area.

SUDBURY RESALE MARKET EASES

Sales in Sudbury, from MLS, have been moving steadily in 2008. There are several contributing factors, the significant one is the peek that resale’s have seen in 2007 and 2008. Not to mention, that employment has now leveled off first time buyers are starting to evaporate from the Sudbury area. CMHC expects 2530 sales of resale homes in he year ending 2008, which would be 8.6% less than the same period last year.

Clearly the problem is supply and demand, which historically affects the growth and the volume of resale home sales.

SUDBURY MOVING TO BALANCED MARKET

Although there has been economic growth at moderate levels, over the same period last year, a stunning prediction was made by Canada Mortgage and Housing Corporation in that even though employment will be strong and there will be substantial population growth in Sudbury and surrounding areas in 2009. This will still only sustain moderate growth and the balancing of the market.

Canada Mortgage and Housing Corporation predicts that there will be continued growth in 2009 in major commercial projects with over $20 billion worth of projects that are commencing in 2009 for Sudbury and the surrounding areas, concentrated in the mining areas.

MORTGAGE RATES

Canada Mortgage and Housing Corporation predict that interest rates will decline by a further 25-50 basis points from their current levels in 2009. However, due to the cost of borrowing to the Canadian banks from the markets, the mortgage interest rate will marginally increase in the latter half of 2009, but not significantly enough to negatively affect the housing market in Sudbury and surrounding areas.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64363/64363_2008_B02.pdf

Moishe Alexander’s Review

New Home Market – New Home Construction Under Pressure

St Catherines, Ontario - Credit B. Gilliard, Flickr

Moishe Alexander says new home construction will ease back by 12 per cent to around 1,000 homes in 2009 from 1,140 home starts in 2008. The contraction will be felt across all housing types, with the number of single detached home starts easing off by about 13 per cent. Given their popularity, townhouse starts will moderate by only 8.3 per cent. The lower number of starts is attributable to uncertainty about economic prospects, limited land supply, demographic changes and more selection in the resale home market. Construction of single-detached homes will continue to moderate because of land supply limitations.

This will translate into higher prices, especially in the relatively built-up northern part of St. Catharines- Niagara. Given the land supply limitations and Greenbelt legislation constraints in the north, more active residential construction is expected to occur in the southern areas of the region. Single-detached homes will also continue to lose their attraction due to changes in the region’s demographic composition. The declining average number of persons per household suggests that smaller households will require smaller and less expensive homes. Moreover, an aging population will need to live closer to amenities, in homes which are easier to maintain than single detached houses. In some cases, wealthy seniors will move from small single-detached houses to larger condominium apartments. This is still a movement to higher-density housing. To accommodate a growing population of older people, there will be more construction of townhouses and apartments, more retirement home building and many redevelopment projects. Some of these projects are expected to take place in former industrial sites abandoned by the manufacturing industry. Prices for new homes will continue to grow although at a slower pace than in 2008. Rising residential construction costs associated with land supply constraints and higher development charges will account for the major part of the increase. Increasing concrete and steel costs will also contribute to higher costs for high-rise construction. Consequently, in 2009, there will be a shift to more modestly priced housing which will lower the average price. The softening and well-supplied resale market will offer a broader selection of homes for buyers thereby encouraging more interest in resale homes which are more affordable relative to the new home market. The price differential between Toronto and St. Catharines- Niagara homes, on the other hand, will continue to attract many well off households from Toronto area, especially among people of preretirement age and those whose commutes are less-than-daily because of workplace flexibility. This will provide some support to the slowing market.

Resale Market – Back to Balance

Moishe Alexander says sales are forecasted to moderate again in 2009 by 4.9 per cent to 5,800 transactions. A moderation in employment, slow growth in earnings and less migration are the main factors behind the projected tapering off. Prices increasing at a more subdued pace will mitigate the decline in demand. The region is losing population to all other areas in Canada except for Toronto and Hamilton. Since people moving to St. Catharines-Niagara tend to be older than those leaving, there will not be as many first-time buyers coming to the region. At the same time, the housing demand of incoming migrants from Toronto and Hamilton will be probably more concentrated in the adult lifestyle-housing segment of new homes. The number of listings in 2009 is expected to trend slightly higher to the 12,600-level which is a moderate gain of 0.8 per cent after the 6.7 percent increase in 2008. The sales-to-new listings ratio will move down to balanced market territory at around 49 per cent in 2008. The ratio will ease down slightly in 2009. The greater selection in the resale market will underlie the deceleration in the growth of resale home prices to 1.9 per cent, a rate similar to inflation. Buyers will have definitely more options to find a home of their choice. Resale home prices have been growing slower than new home prices in 2008. This is forecast to change in 2009 as builders will start sensing demand for new homes is declining. As a result, the resale price growth will again outpace new home price growth, but both will be slower than in the past.

Economic Factors- Local Economy to Contain the Slowdown

Moishe Alexander says that in 2008, the labour market has been strong creating slightly over two percent more new jobs. In 2009, the economy is not expected to perform as strongly. Employment is forecast to moderate by 0.7 per cent and the unemployment rate will edge a little higher. The moderating employment picture is also consistent with demographic trends. The region has one of the oldest and slowest growing populations in Canada. More and more baby-boomers will be retiring in the coming years and since the migration into the region is not expected to be strong, the labour force will be shrinking. Several strong service-producing sectors, particularly health care, public administration and, to a lesser degree, educational and financial services, will have better performance somewhat offsetting job losses in other sectors. Even tourism sector which is perceived to be very vulnerable to the fluctuations in the value of the Canadian dollar has been doing relatively well. Although the number of trips by US citizens is down significantly, a steady inflow of international tourists and more domestic travellers have sustained the tourist industry. Average weekly earnings will grow in 2009 but at a slower rate than in 2008. Some service sectors are adding relatively high-wage jobs. The regional economy is becoming better positioned to weather economic downturns thanks to diversification of the production base. Also, the region is gradually shifting more to the creation of many smaller but more viable businesses which replace large plants.

Mortgage Rates

Moishe Alexander says that mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one year posted mortgage rate will be in the 6.00-6.75 per cent range, while three and five year posted mortgage rates are forecast to be in the 6.50-7.25 percent range.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64315/64315_2008_B02.pdf

London, Ontario - Credit b0ratDI, Flickr

London Ontario has had a small decrease in housing starts and is returning to the historical low levels of housing starts of years gone by and the housing starts are down 29%. CMHC is forecasting 732 units single-detached starts, 15 semi-detached units, 10 apartment condominium ownership units, and 10 apartment rental units, for a total of 767 housing starts for 2008. This will decrease by 400 units in 2009.

SINGLE-DETACHED FORMS OF HOUSING POISED FOR ANOTHER STRONG YEAR

This year Canada Mortgage and Housing Corporation predicts that London Ontario will surpass the housing start levels of 2006, and 2007 by pouring more than 700 foundations. However, in 2009 Canada Mortgage and Housing Corporation predicts that there will be only 400 single-detached homes started, a decrease of 29% from 2008.

LONDON’S RESALE MARKET WILL BE MODERATE

Canada Mortgage and Housing Corporation states in its outlook report that after 6 years of consecutive double-digit price growth, the resale market in London will balance itself off in 2009. In 2007, the average MLS price for a detached home is currently $205,000.00 in 2008 and we will see a 2.5% increase in 2009, to push the resale average price to $211,000.00.

LONDON MARKET TIPS INTO BALANCED CONDITION

As London Ontario has experienced substantial price growth over the past 3 years, Canada Mortgage and Housing Corporation predicts that there will be continued but moderate growth in 2009. However, in major commercial projects there will be over $15 million worth of projects that are commencing in 2009 for London and the surrounding areas, concentrated in London Ontario.

MORTGAGE RATES

Canada Mortgage and Housing Corporation predict that interest rates will decline by a further 25-50 basis points from their current levels in 2009. However, due to the cost of borrowing to the Canadian banks from the markets, the mortgage interest rate will marginally increase in the latter half of 2009, but not significantly enough to negatively affect the housing market in London and surrounding areas.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64327/64327_2008_B02.pdf

Moishe Alexander’s Review:

Sustained Demand for Housing

St Johns, Newfoundland - Credit BriBriTO, Flickr

Strong fundamentals such as a solid local economy, continued inmigration and favourable employment will sustain the demand for housing within the St. John’s region throughout the remainder of this year and in 2009. Accordingly, the housing market will continue to perform well. The renovation sector will build on its recent strength, exceeding $800 million annually over the forecast period. With homeownership costs increasing, some prospective buyers remain sensitive to prices when considering the purchase of a home. However, personal income growth and a tight labour market will continue to provide support to the overall level of demand for both new and existing homes. Furthermore, energy related announcements such as Hebron and growth throughout the local oil industry continue to fuel the housing market, with unprecedented buyer demand supporting current and future house price appreciation.

Resale Marke:

Buoyant MLS® Market

Having posted record sales for several years in a row, the local resale market is expected to continue this trend, eclipsing the 4,000 unit mark this year and in 2009. Accordingly, the forecast calls for MLS® sales of 4,800 units this year, with 4,400 sales expected in 2009. With many new homes selling through the MLS® system, solid numbers for housing starts will have a positive impact on total MLS® sales over the forecast period. Unprecedented housing market activity this year has been characterized by higher than normal unit sales, constrained listings supply and sharp price increases. In fact, active listings are approximately 40 per cent lower this year versus last year and with demand expected to remain high over the forecast period, unit sales growth will be constrained by fewer listings in 2009. While favourable for sellers, very tight resale market conditions have proved challenging for buyers, resulting in multiple offers and offers above list price on choice listings. With fewer listings available, buyers have looked to the new home market instead. However, the growing new versus existing house price premium more first-time buyers are choosing existing home over a new home, adding pressure to the resale market.

Resale Market Classified as Sellers

The resale market became balanced in 2005 after three years that favoured sellers. Balanced conditions existed for less than a year, as record sales activity was offset by an increase in active listings in 2006, driving the number of listings to their highest level since 1999. As a result, the St. John’s resale market was classified as buyers until mid 2007. Subsequent robust economic activity and in-migration to the region, combined with solid resale market dynamics, positioned the market once again as a sellers market. With fewer available listings to choose from and choice listings selling quickly, prospective homebuyers continue to face challenges in their search for a new home. The average time on market has trended lower than historical norms and notable price growth has been experienced in all segments.  The current forecast is for active listings to remain low. As some sellers capitalize on recent price appreciation, others downsize from their family homes, making way for new young families in the active move-up segment. The increasingly active move-up buyer segment will continue to absorb many of these family homes. This segment will also be bolstered by returnees from Alberta coming home to St. John’s to work on energy related projects. As a result, the local resale market is expected to remain classified as sellers through to the end of 2009.

Steady Price Growth

With the market classified as sellers, expect to see steady price growth this year and in 2009. The average MLS® house price is forecast to end this year at $176,500, an increase of 18.3 per cent, followed by a further 6.2 per cent gain in 2009 to $187,500. The active move-up buyer segment will result in two-storey homes experiencing the highest price growth over the forecast period. The current cost of homeownership will continue to reduce on two-storey demand from the first-time buyer segment. As such, demand for bungalows with or without basement apartments should remain a solid alternative for this segment of the market.

New Home Market:

New Home Demand Will Continue

A favourable provincial net-migration picture, combined with local workers commuting to and from Alberta, will increase provincial housing demand this year. Activity will only retreat slightly next year to a more normalized level. Consequently, total provincial housing starts are expected to reach 3,100 units this year, with 2,725 forecast for 2009. Conditions within the St. John’s metro area will also remain favourable. Robust residential construction activity will continue due to solid economic and demographic factors, as well as an expectation of continued inmigration to the region, as a result of recent energy project announcements. The expected strength in overall home buying activity will sustain a healthy level of residential construction activity within the metro region over the forecast period. However, additional price growth, combined with higher development and construction costs, will partially reduce demand in the new home market. On the flip side, with fewer listings available within the local resale market, some buyers will continue to face difficulties in finding a home that meets their needs and may end up buying a newly built home instead.  As demand for housing increases, this situation is not expected to change significantly. Accordingly, total housing starts are forecast to increase 19.9 per cent to 1,775 units within the St. John’s region this year with activity taking a small pause in 2009 to 1,650 starts.

Flat Multiple Starts:

Activity

Multiple unit construction is expected to remain flat over the forecast period, offset slightly by higher numbers of condominiums and an increase in affordable housing projects. Continued in-migration, due to increased economic activity and employment, and demographic trends such as smaller households and an aging population, will support the growing condo market in St.  John’s. With a recent peak in supply and higher disposable incomes, demand for new semi-detached homes is expected to remain fairly flat, as buyers opt for singledetached dwellings. That being said, new lower-priced semi-detached units will remain attractive as overall house prices continue to grow. In view of this, the multiple housing starts forecast calls for 350 units by the end of this year and another 350 in 2009.

Rental Market Decrease in Vacancy Rate

Several factors will decrease the vacancy rate this year and in 2009. As homeownership costs rise, the movement of renter households to homeownership will continue to slow. However, out-migration of the 18 to 24 year-old segment of the population will persist and once again this will put upward pressure on the vacancy rate. In fact, close to 80 per cent of this age group tend to be renter households. Investment in rental housing will increase the supply only slightly this year and next. Accordingly, the vacancy rate for structures containing three or more units is forecast at 1.0 per cent in 2008 and 1.5 per cent in 2009. With the vacancy rate decreasing, expect monthly rents to increase by 6.0 and 11 per cent this year and next, respectively, as landlords attempt to recover increased costs associated with maintaining the rental stock and lower vacancies and higher energy costs exert upward pressure on rents.

Economic Trends:

Economic Growth Will Strengthen

The Hebron project continues to drive local economic growth. The ramping up of the project will contribute to stronger growth in 2009. However, declines in offshore oil production will dampen pronounced GDP growth in 2008. In fact, during the January to August period of this year, oil production decreased 9.2 per cent over the same period in 2007. Terra Nova and Hibernia are expected to continueto see declines in production over the 2008-2009 period. Higher commodity prices over the past few years have resulted in increased mineral exploration activity in the interior region of Newfoundland, as well as Labrador. However, the recent correction in commodity prices may suggest a moderation in growth. The fishery may benefit from recent declines in fuel costs and the Canadian dollar. Coming off the heels of real GDP growth of 7.9 per cent in 2007, additional growth in the final GDP number for 2008 and again in 2009 is expected.

The local labour market has performed very well in recent years, thanks in large part to the increased economic activity and growth that has been experienced as a result of the oil sector. Last year represented a 26 year low for unemployment and a 26 year high for employment. This trend is expected to continue in terms of both employment growth and the unemployment rate remaining low this year and next. The tight labour market conditions continue to exert upward pressure on wages and salaries. Overall, personal incomes continue to grow, having increased 4.3 per cent in 2007, while personal disposable income increased 5.0 per cent, with additional growth expected this year and in 2009. Retail sales were up 9.0 per cent last year and similar results are expected for 2008 and 2009. In fact, during the January to June period of this year, retail sales increased 7.1 per cent over the same period in 2007. Some of this growth has been driven by the Alberta commuter, working in Alberta and coming back during their time off, injecting their earnings into the local economy. On the population front for the first time in 16 years, the NL Government recently announced a net population ncrease of 1,436 from July 2007 to July 2008. This was driven primarily by net-migration of 1,713, as people continue to relocate for work from other provinces, particularly Alberta.

Mortgage Rates

Mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases.  Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one year posted mortgage rate will be in the 6.00-6.75 per cent range, while three and five year posted mortgage rates are forecast to be in the 6.50-7.25 per cent range.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64271/64271_2008_B02.pdf

Housing Steady Through to 2009

Hamilton, Ontario - Credit D. Searles, Flickr

The Hamilton Census Metropolitan Area’s (hereafter referred to as Hamilton) housing market has performed relatively well, in both the resale and new home markets. A growing population thanks in part to a resurgence in net migration last year, and a growing job sector in emerging industries will keep the housing market healthy. However, the resale market is expected to trend towards the lower end of a sellers’ market this year as listings move higher and sales moderate in pace. As a result of more choice in the resale market, fewer new home starts are expected in Hamilton next year. The average price of both resale and new homes are expected to continue rising, though at a modest rate.

New Home Market – Fewer Starts in 2009

New home starts this year will climb nine per cent to 3,285 starts, due to increases in semi-detached, townhouse and apartment starts. Single-detached starts are expected to remain at the same level as last year. New home starts will decline next year to 3,045 starts, slightly above last year’s total. The change in the selling price of new homes as measured by the New Housing Price Index (NHPI) has grown by more than four percent annually in Hamilton since 2002. The rising cost of development is one factor that has forced prices up. Consequently, builders are adjusting by constructing less expensive homes to keep home prices affordable for homebuyers. This will include building smaller single-detached homes and more multiple-family home types – semi-detached homes, townhouses and apartments. This inclination toward more construction of higher density home types is supported by recent demographic trends from the latest census, which revealed a sharp shift in housing type preference by all age groups, away from single-detached houses to other dwelling types. This trend is expected to continue, particularly since empty nesters, who are interested in downsizing, will increase from just under a quarter of all households currently to over a third in the next 25 years. Starts are still ahead of household formation, which indicates some slowdown in starts is likely over the next five years. By the end of this period, the echo-boomers (children of the baby-boomers) will begin to buy their first homes, leading to a partial rebound in starts. In Brantford, total home starts will reach 600 this year, an increase of two per cent from last year. However, a drop in single-detached starts in the third quarter has contributed to fewer starts for the year thus far. Over the same period, semi-detached, townhouse, and apartment starts jumped 61 per cent. The average price of a new single-detached home is expected to reach $252,000 in Brantford next year.

Resale Home Market -Sales to Ease From Record Levels

Despite moderating economic conditions in Hamilton and in the broader Canadian economy this year, the resale market in Hamilton has performed relatively well. Just under 13,000 sales are expected in Hamilton this year – a decrease of 7.7% – and the average price of an existing home is forecast to reach $280,000 – a four per cent increase from last year. It is important to note that 2007 was a peak year in the Hamilton resale market and thus most other years pale in comparison. In 2009, the resale market will become more balanced. Listings will fall slightly to 19,200 and sales will drop to 12,000. More choice in the resale market will translate into more moderate price growth for next year at just under three percent. Price growth that falls in line with the level of targeted inflation will encourage buyers to continue purchasing homes in the resale market next year. More moderate price growth expected next year will help support housing demand going forward. Still, there will be some pull back from first time buyers coming from the rental market who generally have lower household incomes than owners. Some of these would-be buyers may choose to remain in the rental market. The vacancy rate is forecast to be 3.6 per cent in 2009. In Brantford, 2,000 sales of existing homes are expected in 2009 and the average price will rise 2.8 per cent to reach $224,000. Less expensive homes in Brantford as compared to the surrounding area will drive some buyers to this market, though moderate employment growth will put downward pressure on sales.

Local Economy -Local Job Market Diversifying

Manufacturing employment in Hamilton has eased off its peak in 2004, when jobs in this sector represented 21 per cent of all jobs. Today, manufacturing employment represents just 14 per cent of all jobs in Hamilton. Despite the drag from manufacturing employment, total employment in Hamilton is at a record level. Also, full-time jobs – a key driver of ownership housing – remain at a steady high. This means that employment in sectors other than manufacturing continues to keep the total unemployment rate in Hamilton under 6.5 percent. In addition, targeted growth in employment sectors such as health sciences, biotechnology and advanced manufacturing, coupled with public investment in local research institutes has contributed to the diversification of Hamilton’s job market. Innovation and developing new industries will help sustain economic growth in Hamilton, and allow it to continue competing in the global economy. Nevertheless, total employment is expected to increase by less than one per cent per year in 2008 and in 2009 in Hamilton.

Long Term Economic – Growth in Brantford

In Brantford, employment is also growing, especially in full-time jobs. Brantford continues to attract business investment through incentive programs and thus is able to retain and create more jobs. Also, Brantford’s post-secondary institutions are expanding and thus are expected to attract more people to the area. Long-term growth is expected in Brantford given the provincial plans to intensify certain areas of Southern Ontario. Although the closure of the Daimler AG plant in St. Thomas is expected next year, overall employment is expected to grow modestly in Branford at approximately one per cent per year in each of 2008 and 2009.

Mortgage Rates

Mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one year posted mortgage rate will be in the 6.00-6.75 per cent range, while three and five year posted mortgage rates are forecast to be in the 6.50-7.25 per cent range.

You can find the entire report in PDF format through the following link:

http://www.cmhc-schl.gc.ca/odpub/esub/64303/64303_2008_B02.pdf