The Canadian Mortgage and Housing Corporation (CMHC) recently released its Housing Market Outlook for the fourth quarter of 2010 – a survey of Canada’s home mortgage and housing markets for the balance of this year, and a forecast of how mortgage and housing markets are likely to shape up as we move into 2011.
The CMHC report (available here) shows a moderation in new home construction, which it expects will continue forward into 2011. Overall housing starts are expected to decline somewhat in 2011, falling from an estimated 186,200 units of new construction in 2010, to a forecast 174,800 units in 2011.
Meanwhile, sales of existing homes are expected to rise slightly in the last quarter of 2010 and into 2011, while overall sales are expected to drop slightly on a year-over-year basis moving forward. Estimated sales of 440,300 units in 2010 are forecast to slow to 438,000 sales in 2011.
Housing prices – the all-important indicator for existing homeowners concerned about levels of home equity, and for prospective purchasers concerned about affordability – are also expected to moderate moving into the new year, as “balanced market conditions will dampen upward pressure on house prices,” according to the CMHC forecast. The average house price, expected to be $336,800 for 2010 once all the numbers are in, is forecast to increase slightly in 2011 to a projected $339,800.
Overall, the picture painted by the CMHC is one of moderating home mortgage and housing markets in Canada. Declines in new home starts combined with lower projected sales for 2011 will contribute to a moderate increase in housing prices that more closely reflects historical norms – as opposed to the great run-up in housing prices witnessed in 2000 to 2008. A more balanced housing market is projected to solidify existing home equity, and – coupled with continuing low mortgage rates – contribute to affordability for first-time home buyers.
