Stop me if you’ve heard this one before: the CMHC is expecting the pace of home building to slow down for the rest of the year and into 2015. The third quarter Housing Market Outlook Report predicts a soft landing for a market that has been anything but easy to predict this year.
“Recent trends have shown an increase in housing starts, which is broadly supported by demographic fundamentals,” said Bob Dugan, Chief Economist for CMHC.
“However, our latest forecast calls for starts to edge lower as builders are expected to reduce inventories instead of focusing on new construction.”
Looking back to the first quarter predictions, the CMHC then suggested that a gradual increase in mortgage rates and less demand among first-time buyers would keep construction in check. The agency also predicted that builders would slow down, given the the relatively high number of units already under construction.
So far, 2014 has defied many economists’ expectations. While Canada saw starts falter in January, they edged up slightly month-to-month in February, declined in March, then rose month-to-month in April, May, June and July.
The CMHC believes that moderation is still on the horizon, predicting that Canadian housing starts will range between 179,600 and 189,900 units in 2014, with a point forecast of 184,800 units. For 2015, it expects housing starts to range from 163,000 to 203,200 units, with a point forecast of 183,100 units.
As far as buying activity is concerned, the CMHC thinks MLS sales will range between 450,800 and 482,700 units in 2014, with a point forecast of 463,600 units. In 2015, sales are expected to range from 455,800 to 502,900 units, with an increase in the point forecast to 474,300 units.
The CMHC believes prices will continue to increase in 2014 while 2015 will see slightly less growth. The average MLS price for a Canadian home is expected to fall between $394,700 and $405,700 in 2014 and between $396,500 and $416,900 in 2015. CMHC’s point forecast for the average MLS price calls for a 4.5 per cent gain to $399,800 in 2014 and a 1.8 per cent gain to $406,800 in 2015.