CMHC Housing Market Outlook

Soft Landing for Housing Starts in 2008

Housing starts will moderate this year to 209,500 units after reaching 227,395 units in 2006, according to Canada Mortgage and Housing Corporation’s (CMHC) first quarter Housing Market Outlook report. Although residential construction will decline, 2007 marked the sixth consecutive year in which housing starts exceed 200,000 units. Starts will ease further to 195,500 units in 2008.

“Construction activity will continue to moderate as demand for home ownership moves toward more sustainable levels,” said Bob Dugan, Chief Economist at CMHC. “Most of the pent-up demand that built up during the 1990s has been absorbed, and higher mortgage carrying costs due to continued strong price growth and modest increases in mortgage rates will contribute to the slower pace of new home construction both this year and next.”

Existing home sales, as measured by the Multiple Listing Service (MLS®), remained near record levels in 2006. Sales will ease to 464,550 units in 2007 and to 449,200 units in 2008. Similarly, after five years of strong growth in house prices, the rate of increase in the average MLS® price will moderate to 5.9 per cent in 2007 and 3.3 per cent in 2008 as existing home markets move toward balanced conditions. The strongest price growth will be in Western Canada; with the average MLS® price in Alberta growing by 13.3 per cent in 2007 “” after having increased by 29.5 per cent in 2006. Average MLS® prices in Ontario and Quebec will grow by 3.2 per cent and 4.1 per cent in 2007, respectively.

In Ontario, slower growth in net migration, rising new home prices and increased choice in the resale market combined with land constraints will weaken housing starts from 73,417 units in 2006 to 67,000 units in 2007 and to 62,750 units in 2008. These declines will move housing starts in Ontario into line with the average level over the past decade and a half.

See the full CMHC Housing Market Outlook 2008 »