Canadian Housing Market Update – Dec 2008

The CMHC released their latest Canadian housing market update, called Housing Now, in December 2008 and it includes great info on the state of the Canadian housing market as of Q3 2008. In brief housing starts declined, house prices and residential mortgage credit were actually up, with house sales declining. This is despite the fact that we’re having, what we hope will be, a once in a lifetime global economic crisis.

Other interesting points include:

Housing starts

  • The annual rate of housing starts (seasonally adjusted) was 172,000 units in November, down from 211,800 units in
    October
  • CMHC forecasted 212,000 units for 2008

House prices

  • The New Housing Price Index (NHPI) was up 1.5% in Oct’08 compared to last year and was actually the smallest annual increase since Oct ’99
  • New house prices were up for all major centres except for Edmonton, Calgary, Vancouver and Victoria between Oct ’07 and Oct ’08
  • Average MLS® price in the Q3’08 declined by 4.1% over the same period last year

House sales

MLS® sales (seasonally adjusted) were down by 12.3% to 27,743 units in November ’08, compared to 31,617 units in Oct’ 2008

For the first 11 months of 2008, actual MLS® sales were down 16.3% to 418,241 units compared to the same period in 2007 which is hardly surprising considering the economy

  • The volume of home sales ($) fell by 10% in Q3 ’08 compared to the same quarter last year and this is the third decrease since 2003

Economy

  • Unemployment: Increased by 48,300 in November 2008 which resulted in the Canadian unemployment rate to rise to 6.3%
  • Interest rates: The Bank of Canada cut the overnight rate target by 0.75 of a percentage point to 1.50% (next meeting is on January 20, 2008)
  • The Bank of England meets on January 8 and is expected to cut rates again by 0.50%, so we’ll see if the BoC follows as well
  • Inflation: The Consumer Price Index (CPI) was up by 2% in November 2008 compared to November 2007 and the drop was mainly attributed to the decline in gasoline prices from their peak of almost $150 a barrel to the $40 range

Mortgages

The CMHC included in their report some great stats on the amount of outstanding residential mortgage credit accompanied by graphs which we’ve included below. Interestingly, mortgage credit for private residences increased by 11.8% in Q3’08 compared to Q3’07 and was $887.5 B. They said that the main reason for this growth was that mortgage rates had stayed fairly low when compared to historical mortgage rates and that employment and income were stable. Also its seems that rising house prices helped to support the increase in mortgage credit compared to last year.

The outstanding mortgage credit of $887.5B was broken down into the different lending channels that funded these home loans. The big Canadian chartered banks made up for most of the lending at 73% in Q3 ’08, followed by credit unions at 17%, which combined make up almost 90% of the market. The complete breakdown is shown below:

Share of the stock of residential mortgage credit
by institution type (%)

3Q07 4Q07 1Q08 2Q08 3Q08
Banks 72.4 72.3 72.3 72.4 72.8
Trusts 1.4 1.5 1.5 1.5 1.5
Caisse and Credit Unions 16.7 16.7 16.8 16.7 16.6
Life Ins.Co. 2.3 2.3 2.4 2.3 2.3
Pension funds 2.1 2.2 2.3 2.2 2.2
Others** 5 5 4.9 4.8 4.6

Mortgage credit outstanding

$millions

2006 2007 3Q07 4Q07 1Q08 2Q08 3Q08
TOTAL 699,281 779,315 793,943 820,500 838,820 860,689 887,497
% change (year-over-year) 10.7 11.4 11.9 12.7 13 12.6 11.8

Related Topics

Mortgage News / Mortgages

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