CMHC says solid foundation for heathy housing market

While sales of existing homes in Winnipeg and the surrounding municipalities are expected to slightly decrease this year, the average price paid for a home will continue to increase, according to a new report from Canada Mortgage and Housing Corporation.

The second-quarter housing outlook also indicated new home construction will decrease slightly in 2008, primarily due to a decline in multiple-family construction. 

On the other hand, single-family homes will continue to show strength, resulting in 80 more new homes built this year than 2007’s total of 1,870.

CMHC forecasts fewer MLS® sales this year — 12,000 vs. the record-

setting pace of 12,319 units sold in 2007.

Across Manitoba, CMHC is expecting a total of 5,450 units of new construction in 2008, a decrease from 2007’s total of 5,728 starts. CMHC said starts will rebound in 2009 to 5,650 units in 2009.

MLS® sales in Manitoba are expected to total 13,600 units in 2008, while there were 13,928 units sold in 2007. In 2009, MLS® sales are predicted to approach 2007’s record with 13,900 units sold.

Manitoba will benefit from strong job growth and rising immigration in 2008, according to CMHC, resulting in “healthy levels of new home construction.”

“The average MLS® price in Manitoba increased 12.6 per cent in 2007 (to $169,189) and will continue to increase at a pace above the national average by 13.5 per cent in 2008 

(to $192,000) and 7.8 per cent in 2009 (to $207,000),” according to CMHC’s housing outlook.

CMHC said the average MLS® price in Winnipeg rose to $200,000 from the $174,500 recorded in 2007, while the average MLS® price is expected to be $216,000 in 2009.

Nationally, MLS® sales and new home construction will slow in 2008, but remain high by historic standards, according to CMHC.

“Strong economic fundamentals such as continuing high employment levels, rising incomes and low mortgage rates will provide a solid foundation for healthy housing markets this year,” said Bob Dugan, chief economist for CMHC. 

Still, CMHC is predicting housing starts will decline by 214,650 units in 2008, down from the 228,343 starts in 2007.

“Most of the pent-up demand that built up during the 1990s has now been fulfilled and residential construction 

activity will gradually move in line with Canadian demographic fundamentals,” he added. “These factors will continue to exert downward pressure on housing starts, which will decline to 199,900 units in 2009.”

CMHC’s predictions for existing home sales is borne out by reports released by the WinnipegREALTORS® Association.

“By April, the total MLS® sales was actually a few percentage points lower than what we had predicted in our 

2008 forecast at the start of the year,” 

said WinnipegREALTORS® president 

Darlene Clare.

From January 1 to the end of April, MLS® sales were down, although by a mere one per cent when compared to 2007.

“What is most encouraging is the 

influx of new listings in April,” added Clare, who is forecasting a more balanced market for the rest of the year. “Close to 1,900 listings were entered on MLS®, which is the highest number we’ve had for the month in 10 years.”

Despite the increase, demand remained brisk with three out of every four new listings selling in April.

“Housing markets are becoming more balanced (across Canada) and price gains are becoming more modest as a result.,” said Gregory Klump, the Canadian Real Estate Association’s chief economist. “This trend is forecast to continue as rising mortgage carrying costs and property taxes erode affordability.”

Nationally, CMHC said the MLS® 

average price will rise by 5.1 per cent in 2008 to $323,000 and by 3.3 per cent to $333,500 in 2009.

CMHC said mortgage rates should increase in 2008 and 2009 with the one-year posted rate in the 6.5 to 7.5 per cent range, while the five-year posted rate will be in the 6.75 to 7.5 per cent range.