Canada’s National Housing Starts Lower

While CMHC is projecting that 2014 will be a rebound year for Canadian housing, but expectations have dropped slightly. 2013 will be lower overall when compared with 2012, but the forecast does look optimistic. CMHC is Canada Mortgage and Housing Corporation, the largest tax payer backed provider of Canadian mortgage insurance (PMI). Here we’ll talk about what housing starts are, how they factor into the economy and what this new adjustment to the outlook means.

What are Housing Starts?

Housing starts are new, privately held homes that are under construction. Construction for 2013 is lower than 2012 because many projects were begun in the previous year and don’t count. Basically if a permit is issued for a dwelling to be built, it’s included in the housing start numbers. Starts account for three kinds of buildings: apartments with 5 or more units, single family homes (detached), townhouses, row houses and small condos.

This means if a home was issued a permit in 2011 and it’s still being built in 2013, it doesn’t count in the numbers. This only accounts for NEW construction that should be started this year.

Less New Construction to Start This Year

Overall less new construction will start in 2013, but more will be finished this year than last. Right now the forecast calls for about 183,000 new units to be built this year, which is lower than the some odd 200,000 that were being built last year.

Most of this came from a glut in the condo market – sale prices for low-rise homes are rising because of a lack of new construction in this sector. Many developers got swept up in the condo boom and put all their eggs in one basket – and with many unsuspecting buyers headed towards huge municipal development fee increases over the next year, detached low rise homes are becoming a much more attractive option for many buyers.

Same as Last Report, Expectations Lowered

Even with luxury real estate the numbers are holding steady, not increasing. Homes with a sale price over $2m have remained at about the same level, homes in the $450k to $2m range have been selling very well. Homes worth less than $450k haven’t been doing nearly as well as the rest of the market; this is one of the sectors that aren’t able to move as well, but this could be explained by market movements.

Most sales are in areas where housing prices remain high are where the market price for a home is above $450,000. This report is virtually the same as the report released earlier this year, just with the new starts to pick up next month.

Average Home Price Holding at $370,000

The average across Canada is holding at $370,000, but in areas like the GTA it’s as high as $670,000. Prices are expected to stabilize early to mid-2014 as more low rise homes start coming on the market. CMHC has revised their report once this year, and it may revise it later in the fall for the 2014 outlook. Many Toronto mortgage brokers expect the rush to start petering out by the end of the year, but it just depends on who you ask.

Danny Papadopoulos is an experienced agent of Mortgage Central and an avid blogger for Homebase Mortgages. HBM is a Toronto mortgage broker that provides home mortgages, mortgages for the self-employed, home equity loans and lines of credit, debt consolidation, private mortgage and second mortgage lending. You can visit their website at http://www.homebasemortgages.ca/