Housing Correction Won’t Happen, because Canada doesn’t Need One

Canadians were waiting and waiting for a housing correction, and many experts said that one was indeed necessary in order to slow down the amount of empty homes sitting on the market. And, with supply already far exceeding demand, more home starts would only mean more useless supply; and that could land Canada right back into a recession. But, according to the newest report from the Canada Mortgage and Housing Corp. (CMHC), no correction will be made – because none is needed.
In the report, the CMHC shows clear evidence that while home starts have been increasing every month for the past several months, Canadians should take this as the good news it is, and stop worrying that it’s soon going to get out of hand. Because as their report indicates, while growth will continue to be strong, it is going to even out, making sure that Canadians don’t bite off more than they can chew. And the stats definitely support their argument.
Those stats say that the total number of Canadian housing starts this year will be 183,200, which is more than was first predicted in the second quarter. At that time, only 179,500 starts were predicted. The report also shows that the number of starts in 2012 is also slightly higher than expected, up to 183,900 from the 185,300 that was predicted in the second quarter.
183,900 housing starts is a small decrease from the 189,930 starts that Canada saw in 2010. This, the CMHC points to, is one reason why no housing correction is needed. Another, says Mathieu Laberge, deputy chief economist for CMHC, is because “Housing starts have been strong in the last few months, but are forecast to moderate closer in line with demographic fundamentals,Despite recent financial uncertainty, factors such as employment, immigration and [Canadian] mortgage rates remain supportive of the Canadian housing sector.”
So what can homeowners and home-buyers actually take from the report? That there’s no need to worry about what additional starts will do to an economy that’s just making its comeback; and that there’s no need for renters to fear that Canadian home prices, and Canadian mortgages, will soon be unreasonable. While we may be on an upward climb this year, we’re still within reasonable levels, which means that house prices will remain within reasonable levels. And even though home starts are going up, they’re still not as high as they were in 2010 – when everyone was rejoicing that the new home starts were a sign of a better economy to come.
Canadians may really just need to relax a little. That better economy is here and while it might not be in our nature, it’s time to enjoy it. Not worry about it.