With sales of existing homes now showing momentum in the wake of a slump, construction of new homes should also pick up modestly later this year or in 2014, Canada Mortgage and Housing Corp. predicts.
The average monthly growth rate has recently been rising for sales over the Multiple Listing Service, new listings, and home prices, Mathieu Laberge, deputy chief economist at the Crown corporation, stated in a press release. “This change in the trend of the resale market is expected to eventually lead to a similar change in the trend of the new home market, as housing starts dynamics typically lag the resale market by one to three quarters.”
CMHC is now forecasting that housing starts this year will come in between 173,300 to 192,500 units, and has pegged its point forecast at 182,900 units, well below the 214,827 homes that were built last year. Starts are expected to rise to 188,900 units next year, still shy of last year’s level.
Economists, including those at CMHC, have not had a good track record lately when it comes to predicting the level of new homes that will be built. At the outset of 2012, most were sure that the feverish pace of housing starts that had been occurring would cool, but for most of the year it did not. As a result many boosted their forecasts for this year.
The number of condos going up in Toronto was a big part of the reason that their estimates were off. In its annual report last month, CMHC – the organization that tracks and publishes Canada’s housing starts data – noted that its goal is that its forecasts should fall within a 10-per-cent range of the actual number of housing starts. But heading into last year it had predicted 186,750 starts for 2012, which was 13.1 per cent lower than the end result. It also noted that its forecast was closer to the mark than any of the other 17 major economists that it tracks.
The most recent data showed that housing starts jumped in May to an annual pace of 200,178, while economists had been expecting fewer than 180,000, with the higher level again being attributed to condos in Toronto. Prior to that starts had shown signs of cooling, with April's level coming in at 174,900 on an annualized basis, a 3.5-per-cent decline from March.
CMHC's forecasting caution can be seen in its wording, with it stating in its press release that housing starts should regain momentum "in the later part of the year and/or into 2014."
It said Tuesday that it expects between 412,000 and 474,800 homes to sell over the Multiple Listing Service this year, and its point forecast is for 443,400 units to sell, roughly 10,000 fewer than sold last year. Its point forecast for 2014 is 468,600 units.
It predicts that the average MLS price will come in between $359,400 and $380,000 this year, and between $362,400 and $392,200 next. Its point forecast is calling for a 1.6 per cent increase in the average sales price this year, to $369,700, and a further 2.1 per cent gain next year, to $377,300.