Resale Housing Market to Stabilize by 2012
Fewer buyers and more listings will result in a more balanced resale housing market in Ontario over the next year, according to the third quarter Housing Market Outlook by Canada Mortgage and Housing Corporation (CMHC).
The report states that, due to stronger momentum in Ontario’s labour and housing markets during the first half of 2011, CMHC has issued a more positive forecast than anticipated. Existing home sales and new housing starts are projected to reach 191,900 and 62,400 units in 2011 respectively. However, the demand for new and existing homes in the province is expected to drop slightly for the remainder of this year before stabilizing into 2012. Although lower demand by first-time buyers and higher mortgage carrying costs are expected to dampen housing activity, higher employment and income levels are projected to offset those factors and provide support for housing into 2012.
Ontario’s economy and labour markets have reached their pre-recession levels and are entering a new phase of the business cycle, according to CMHC. Current leading indicators suggest that the pace of the US economic recovery will be more modest than earlier predictions. Meanwhile, Ontario consumers are expected to contribute less to the economic recovery due to a drop in pent-up demand, high energy costs and slower employment growth.
The CMHC report forecasts that single-detached housing starts will slow to 23,000 units in 2012. These types of properties have led the recovery in residential construction activity across the province because many buyers purchased early in the hope of avoiding mortgage rule changes.
Resale home sales will drop modestly this year to 191,900 units before stabilizing at 193,300 units in 2012. Mortgage rule changes encouraged more home purchases earlier in 2011. Rising mortgage carrying costs and less first time buyer demand will limit gains in existing home sales in 2012. Shifting demand to less expensive housing will also support slower growth in the average price. The average MLS price is forecast to be $372,500 in 2012.
To view the full CMHC report, visit www.cmhc.ca click on Library, then click Publications and Reports and then select Housing Market Information. Click on Housing Market Outlook – Canada and Major Centres, Ontario highlights are on page 12.