CMHC Q1 Report Calls for Housing Market Slowdown

CMHC Q1 Report

At the beginning of February, the Canada Mortgage and Housing Corporation released its first-quarter Housing Market Outlook report. The Crown agency’s updated national forecast predicts a stable to slightly declining housing market for this year and into 2016, a finding that’s echoed by economists at the country’s big banks.

Government Accountability

The CMHC looks at two factors when developing its outlook: the total number and sale price of resale homes, and the tally of “housing starts” (i.e. the number of new homes being constructed).

Based on Multiple Listing Service (MLS) stats, the total number of existing home sales will be stable for 2015 and 2016, with somewhere between 150,000 and 200,000 homes exchanging hands across the country. While the CMHC suggests there is “a modest amount of overvaluation at the national level,” overall, the price those homes sell for is expected to rise very modestly, by about 1.5 per cent, to a national average in the range of $384,000 to $428,000 in 2015.

In terms of housing starts, the CMHC expects to see an overall drop – albeit a modest one – across the country over the next two years. In 2015, the drop in oil prices will result in a corresponding drop in new home construction in Alberta. At the same time, the lower dollar should see increased exports from Ontario’s manufacturing sector, causing a slight uptick in starts. By 2016, housing starts will likely decline in all provinces except B.C. and Quebec.

Bank On It

Canada’s big five banks – BMO, CIBC, RBC, Scotiabank, and TD Canada Trust – have a vested interest in keeping track of the housing market, in no small part because of all the interest they earn on the mortgages they hold. (According to the Bank of Canada, these five banks hold nearly 75 per cent of the more than $1 trillion Canadians have in outstanding mortgage.)

On January 26, 2015, TD Economics released an “Economic Forecast Update,” that suggested both the price of existing housing stock and the number of new homes constructed, will “tilt into negative territory” over the coming year.

RBC’s senior economist, Robert Hogue, was even more grim, writing in a January 15, 2015, “Canadian Housing forecast” that, “we believe that rising interest rates and increasingly strained affordability will bring about a moderation of overall activity. On an annual basis, we expect this moderation to translate first into a levelling off of resales nationwide in 2015 before becoming an outright decline in 2016.”

The Silver Linings Playbook

Another group with a vested interest in the real estate market are real estate brokers. Predictably, the realtors are a little more optimistic than the bankers and bureaucrats. Back in December, Re/Max predicted that “the average sale price is expected to remain stable or rise modestly in most cities in 2015.” The agency projects the highest gains in Kelowna (7 per cent), Moncton (6 per cent), and Windsor (5 per cent), with 4 per cent increases in Toronto and Victoria, and a 3% gain in the Greater Vancouver Area.

At the time, Re/Max acknowledged that a long-predicted interest rate might come by the end of 2015, but felt, “Overall, a rate increase is not anticipated to have a dramatic effect on the real estate market, as it would likely be minor and rates would continue to be low.”



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