Canada Mortgage and Housing Corp.’s optimism about Red Deer’s residential construction sector continues to grow.
The national housing agency, which issued its second quarter housing market outlook on Wednesday, is now predicting 720 housing starts for the city this year. That’s up from the 700 in CMHC’s first quarter outlook and the 600 it was projecting for 2010 late last year.
In 2009, work was started on 497 homes in Red Deer: 333 single-detached houses and 164 multi-family units.
In its latest outlook, CMHC is forecasting that 440 single-detached homes and 280 multi-family units will be started in 2010.
The numbers are expected to grow even larger next year, with CMHC anticipating 900 housing starts: 530 in the single-detached category and 370 in multi-family projects.
This positive outlook for Red Deer is supported by actual construction activity during the first four months of this year. As of April 23, there were 208 housing starts in Red Deer — up from 58 for the same period in 2009.
This was the biggest increase among Alberta’s seven largest urban centres. The others ranged from a 190 per cent increase in Calgary to a 41 per cent decline in Grande Prairie.
CMHC market analyst Regine Durand said the improved forecast for Red Deer reflects a declining inventory of unsold single-detached homes — which stood at 69 in April, the same as in April 2009.
“This is a good sign,” she said. “Before, inventories were still higher compared to last year on the single side.”
The inventory of multi-family units in Red Deer remains relatively high, she added, which is expected to discourage builders.
A written analysis in CMHC’s second quarter housing market outlook suggested that relatively low mortgage rates and move-up buying have helped stimulate residential construction in Alberta.
CMHC also considered the resale market in its second quarter outlook. It’s now predicting that 3,500 Central Alberta homes will be sold through the Multiple Listing Service this year, with an average price of $273,000.
For 2011, the Crown corporation is projecting 3,700 MLS sales in the region, with an average price of $282,000.
Earlier this year, CMHC was predicting 4,100 MLS sales in 2010 and 4,300 next year. It anticipated an average selling price $1,000 lower than it’s now calling for in 2010 and 2011.
In 2009, actual MLS sales in the area numbered 3,770. These produced an average price of $264,417.
Durand said the reduced expectations reflect the tighter lending requirements that were announced by the federal government in February and took effect April 19. Another factor was the expectation that interest rates will move higher in the second half of 2010.
“This will slow the pace of resales,” said Durand.
Nationally, CMHC expects the housing market to stabilize.
“It seems now that at least in Canada our economy is becoming a fair bit more positive, so we shouldn’t see the big mad swings going forward,” said Bill Clark, a senior economist with CMHC.
The agency has boosted its forecast of housing starts for all of Canada. Construction of new single-detached homes is expected to increase by 21 per cent in 2010, but decrease in 2011.
The Canadian residential real-estate market experienced the sharpest downturn in at least a decade from late 2008 to early 2009 as a result of the recession, rising unemployment and lack of consumer confidence. Sales volumes ramped up and prices recovered in many major market in the latter half of 2009, but CMHC said it expects activity to slow as pent-up demand is exhausted and mortgage rates rise.
Gregory Klump, chief economist for the Canadian Real Estate Association, expects resales to fall more than CMHC has forecast and for prices to decrease.
“We’re forecasting a small decline in average price next year, specifically because of price declines in Ontario and B.C.”
With files from The Canadian Press.