Thursday, November 18, 2010

Housing Starts Will Stabilize in 2011

A "normal" real estate market- they say?

Housing starts will return to stable ground in 2011, according to the latest forecast released by CMHC. The expectation in the meantime, is that housing starts will continue to ease through the last quarter of 2010.

This current forecast puts housing starts at between 176,700 and 194,700 units in 2010, and between 148,000 to 202,300 units next year as the market makes its’ way back to levels that are appropriate to demographic requirements.

While the economic climate will still foster growth, it will be less than it has been- although that is not all bad news. Says Bob Dugan, Chief Economist for CMHC, “High employment levels and low mortgage rates will continue to support demand for new homes in 2011. Nevertheless, housing starts will decrease to levels are more in-line with long term demographic fundamentals next year.”

Similarly, there is an expectation that existing home market conditions will be balanced over the next two year period where inventory levels are high, and sales slow down. CMHC predicts that existing home sales will be in the range of 423,800 to 455,900 units in 2010, with a point forecast of 440,300 units. In 2011, MLS® sales will be lower and are expected to be in the range of 390,600 to 483,700 units, with a point forecast of 438,400 units.

Ushering in a yin and yang of demand to supply, it is expected that the result will be only a moderate MLS® price increase, indicating a comfortable balance in the market.

This return to stability is expected, for the most part, nationwide, with balance and moderate price increases in various provinces, including Ontario, British Colombia and Manitoba, helped along by low interest rates and to employment levels slowly returning to normal.

"While Ontario home sales and prices have moderated since early this year, Ontario housing activity is now more in line with economic conditions. This ensures more stability in housing markets in the months ahead," said Ted Tsiakopoulos, CMHC's Ontario Regional Economist.

"This transition in housing activity has been orderly thanks to improving job markets and historically low interest rates."
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