Yesterday the Globe and Mail reported that the number of new homes being built will not return to the same levels we saw in 2008 for a long time – regardless of a recovering economy.
Although this shouldn’t come as a surprise to many, the interesting aspect to the story is the reason behind this news.
According to CMHC, in the past it was common for housing starts to reach 200,000 in a given year (it hit 211,056 in 2008), but this year the figure is expected to decline to 141,900. Things look slightly better in 2010 with 150,300 housing starts expected. But by 2013 the number only climbs to 176,800 – 5 years later and still 16% lower than in 2008.
But CMHC believes this to be good news. They say that home starts will not return to those atrociously high levels because it’s not consistent with Canada’s overall demographic needs – not because of a long and painful drop in Canada’s housing market, which would persuade everyone to hold off on buying, resulting in a sudden increase in demand when the market does recover.
But there is some bad news… The CMHC report also suggests that home prices and sales of existing homes are expected to follow a similar trend. Which I’m sure won’t sit well with home owners who have experienced a significant amount of equity loss due to falling house prices.
Other interesting facts from the CMHC report provided by the Globe & Mail are:
- The national average price for a home is expected to fall 6.8% this year to $283,100, and stabilize next year.
- The number of houses resold through the Multiple Listing Service declined to 357,800 units this year, from 433,990 in 2008, but should increase slightly next year to 386,100 units.
- Nationally housing starts are expected to decline 32.8% this year (53% drop in Alberta, 42.5% in British Columbia, 50.2% in Saskatchewan and 31.6% in Ontario)
So although we won’t be breaking any records when it comes to home starts over the next few years, we can rest easy knowing that the predicted figures are much more sustainable in the long run. And after the recent market turbulence, a bit of stability should sound pretty good right now.
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