Hot housing market a good sign
Renewed confidence from consumers seen in home sales
By Derek Abma, Canwest News Service
Improving conditions in the Canadian housing market are a good omen for the economy overall, says the head economist of Canada’s federal housing agency.
Canada Mortgage and Housing Corp. said Thursday it expects markedly improved conditions for housing construction in the latter part of 2009. Part of the reasoning behind this, explained CMHC chief economist Bob Dugan, is rising sales in the existing-home market, which tends to come in advance of more plentiful housing starts.
These are good signs for the Canadian economy, said Dugan, as it shows some renewed confidence from consumers, which are the most important part of the economy.
Comment: Local markets are on fire as well! Toronto has seen records set in June, July and August. Prices are up 0.5% year-to-date, with sales up 2%. Listings have been declining each month as well, with August seeing 38% less inventory than August 2008. June was down 36% and July 37%. August sales were up 27% over 2008, with prices up 6%. If this trend continues, it is entirely possible that 2009 will become the best year ever for Toronto real estate. In July, 1 in 7 sales were bidding wars, with August seeing 1 in 6 sales go to multiple offers. Can you say sellers market?
“It’s not just being confident now, but confident about the future,” he said. “Because when you think about housing, this isn’t a commitment you’re making of just your next paycheque; it’s a commitment you’re making potentially over 25 years.”
CMHC forecast housing starts will reach 141,900 this year and increase to 150,300 for 2010. This is a significant improvement from the earlier part of this year, when the annualized pace fell to less than 118,000 in April.
Still, these expected numbers fall well short of the pace of more than 200,000 housing starts that held steady between 2002 and 2008.
Citing figures from the most recent census, Dugan said Canada generally sees growth of about 175,000 households a year. He said there was a prolonged period during the 1990s when housing starts consistently fell well short of that number, creating pent-up demand that led to the buoyant conditions that lasted until last year.
“This time around, we’ve only had less than a year of housing starts below that level of household formation,” Dugan said. “I don’t think we have this enormous pool of pent-up demand that’s going to allow us to go back to the 200,000-plus pace of housing starts (in the near future).”
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