Moishe Alexander and Canadian Funding Corporation Review CMHC Reports

Posted by Moishe Alexander

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.

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Posted by Moishe Alexander

After two years of sharp declines, and coming off from a decade of annual housing starts largely above demographic needs, new housing construction is set to stabilize in 2009. Amid emerging positive signs in both the economic and financial fronts, total residential construction in the Kingston Census Metropolitan Area (CMA) will rise by 5.2 per cent this year, with 707 new starts.

In addition to the boost to homeownership demand due to low interest rates, the prospects for increased spill-over demand from a recovering resale market will likely result in a faster year-over-year pace of starts during the first half of 2010. As a result, total starts next year will reach 690 units for a slight 2.4 per cent decrease, thus stabilizing construction activity at a pace more in line with household formation.

Coming off from a historically challenging economic environment, the short-term forecast for Kingston’s residential construction industry remains for the most part optimistic. The substantial monetary easing and fiscal stimulus measures in Canada’s Economic Action Plan will improve economic fundamentals. This will renew household’s appetite for big-ticket items in the face of low interest rates.

While spill-over demand from the resale into the new home market typically takes time to fully materialize, Kingston’s new home market looks ripe for a modest recovery. First, new listings for resale have declined substantially from last year, thus lowering supply competition. Second, the level of unabsorbed new home inventories has returned below the long-term average. Finally, the year- to-date pipeline of properties under construction is substantially lower than for the same period last year, which means that there are resources available for future projects.

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Posted by Moishe Alexander

After near record years in new home construction, 2009 residential new home construction will grow below demographic needs in Ottawa Census Metropolitan Area. Total housing starts will close this year at 5,125 units or 27 per cent lower than in 2008 and well below the ten year average for the region. Tight credit conditions for high density development will delay construction in the Capital, particularly for condo apartments. However, increasing strength is expected next year as construction responds to growing demand for housing. In 2010 foundations will rise, growing slightly above population needs with 5,900 new units. Spill-over demand coming from the existing home market combined with low levels of construction this year and declining new home inventories will set the foundations for a strong rebound in New Home construction in the coming year.

Although total starts are expected to soften in 2009, single-detached homes will be declining the least. Single- detached starts will remain at close to 40 per cent of total construction or 2,250 units. The lowest interest rate seen in almost 60 years coupled with more affordable dwellings in Ottawa’s outskirts will result in decreasing monthly mortgage payments.
Single-detached new construction will pick up slightly through 2010. The Monetary and Fiscal stimulus coming from Canada’s Economic Action Plan will further boost the purchase of big ticketed items in the Capital City. Ottawa’s home market continues to be strong, as single-detached starts remain a good barometer of the strength of the new residential construction market.

The average price for new single- detached homes in 2009 will post a similar level of growth to last year and will stand at around $418,400 for a 2.3 per cent increase. Although the underlying increase in price in 2010 will be flat, a greater proportion of more expensive homes will drive the average price higher by 5.7 per cent.

Semi-detached and townhomes will provide an alternative to the single- detached home dwellings when their price increases in 2010. As a result, expect semi-detached and townhomes sales to increase by 10 and 11 per cent next year respectively.

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