Canada Mortgage and Housing Corporation (CMHC) is predicting the worst of the recession if over and that housing markets will stabilize across the country in 2010. “We are definitely seeing signs that the rate of economic retraction in Canada and worldwide is slowing,” says Ted Tsiakopoulos, CMHC Regional Economist.  “However, Ontario is underperforming compared to the rest of the country due largely to our ties with the United States.  A sustainable Ontario economic recovery will rely on improved US business and consumer spending and a pickup in provincial exports which comprise a sizable share of Ontario’s GDP (gross domestic product)”.

In its third quarter Housing Market Outlook, CMHC is more bullish on new construction prospects for Ontario in 2010 than resale housing.  “Sales in resale markets have overshot expectations in recent months,” says Tsiakopoulos.  “New home building is typicaly a lagging indicator that follows the resale trend so while we are expecting a cool down in resales, we believe new housing starts will rise.”

Some of the reasons for the recent surge and expected decline in the resale market include less demand as many prospective buyers rushed to get in before rates and prices rise.  Even though the Bank of Canada has made a commitment to keep short term rates steady until spring, Tsiakopoulos says bond yields which are tied to mortgage rates are poised to increase.  “We will likely see a one-quarter to one-half percentage increase on five year rates,” he says.

Here are a few details specific to Ontario from CMHC’s Q3 Housing Market Outlook Report:

Single starts have started to recover and will continue to trend higher in the second half of 2009.  Single starts will reach 20,150 units this year before stabilizing at 20,625 units in 2010.  Multi-family home starts will also trend higher in the remaining months of 2009, reaching 28,525 unit starts, down from just shy of 44,000 units in 2008.

Ontario existing home sales have staged a remarkable come back this spring when compared to activity in late 2008.  The strong pace seen in the second quarter of this year reflects, in part, activity that was delayed in the previous two quarters and is not likely to be sustained.  The level of sales will move back closer in line with improving economic conditions.  As a result, MLS® sales will average 174,000 units this year.  A gradual recovery in Ontario labour markets combined with low mortgage rates will help stabilize existing home sales at 166,750 units in 2010.

After experiencing buyers market conditions in early 2009, Ontario resale markets have tightened and balanced market conditions will be restored.  As a result, Ontario existing home prices will grow by 1.6 per cent and 0.8 per cent in 2009 and 2010, respectively.

Article reference: “On the Markets”, REALTOR® Edge, October 2009 edition.

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