Jump in housing starts forecast

Housing starts in Red Deer this year are expected to jump nearly 20 per cent, says Canada Mortgage and Housing Corp. in its most recent forecast. The national housing agency’s second-quarter housing market outlook, which was released on Tuesday, said there will be 680 residential construction starts in the city this year.

Housing starts in Red Deer this year are expected to jump nearly 20 per cent, says Canada Mortgage and Housing Corp. in its most recent forecast.

The national housing agency’s second-quarter housing market outlook, which was released on Tuesday, said there will be 680 residential construction starts in the city this year. That compares with 568 in 2012.

CMHC anticipates that much of the increase will come from multi-family development, with work expected to commence on 325 units in such projects — a 34.3 per cent increase over the 2012 figure of 242. In the case of single-detached homes, CMHC is projecting 355 starts, up 8.9 per cent from 326 last year.

As recently as February, CMHC was forecasting just 605 housing starts for Red Deer in 2013.

But Red Deer builders were busy out of the gates, with first-quarter housing starts up 88 per cent in the case of multi-family units and 45 per cent for single-detached homes.

For 2014, CMHC is now calling for a further increase in local housing starts, to 690.

It expects these to consist of 365 multi-family starts and 325 multi-family unit starts.

CMHC expects total housing starts in Alberta to slip two per cent to 32,700 this year, and then rebound to 33,100 in 2014.

“A heightened pace of housing starts in 2012 increased supply levels substantially and will compete with new projects in 2013,” said Lai Sing Louie, a regional economist with CMHC.

“By 2014, lower inventory, along with economic and demographic growth, will encourage a higher level of construction.”

The resale market in Central Alberta will see improvements in sales activity and average prices this year and next, said CMHC in its housing market outlook.

Multiple Listing Service sales are expected to number 4,540 in 2013, a 5.5 per cent increase from 4,304 last year. For 2014, the figure is projected to rise a further 3.5 per cent, to 4,700.

The average local selling price this year is anticipated to be $288,500, up 3.3 per cent from $279,180 last year. The number should rise a further 3.3 per cent next year, to $298,000, said CMHC.

For the province as a whole, MLS sales are predicted to reach 61,600 this year — a two per cent improvement over 2012. In 2014, the tally is expected to climb another 2.8 per cent, to 63,300.

The average price on this year’s sales in Alberta will hit $374,000, said CMHC, up three per cent from the 2012 average. And it anticipates a further 2.1 per cent climb to $381,900 in 2014.

Nationally, CMHC estimates that between 173,300 and 192,500 housing units will be started this year, with a mid-point forecast of 182,900 units.

That’s down nearly 15 per cent from the 2012 level of 214,827 units.

In 2014, housing starts are expected to range between 166,500 and 211,300 units, with a mid-point forecast of 188,900 units, up 3.3 per cent from 2013.

The agency also expects sales of existing homes to range between 412,000 and 474,800 units in 2013, with a mid-point forecast of 443,400 units, down from the 2012 level of 453,372 sales.

In 2014, MLS sales of previously owned homes are expected to range between 435,800 and 501,400 units, with an increase in the mid-point forecast to 468,600 units.

The average MLS price is forecast to be between $359,400 and $380,000 in 2013 and between $362,400 and $392,200 in 2014.

“So far in 2013, the average monthly growth rates of MLS sales, new listings and prices have all been increasing,” said Mathieu Laberge, the agency’s deputy chief economist.

“This follows a period of average monthly declines that held sway over the second half of 2012.

“This change in the trend of the resale market is expected to eventually lead to a similar change in the trend of the new home market, as housing starts dynamics typically lag the resale market by one to three quarters.”

CMHC’s outlook for economic factors is in line with the consensus of private-sector forecasters. Higher interest rates are not anticipated until mid-2014, reflecting expectations of a slower economy in 2013.

It said housing starts should decline in all provinces this year, while a modest rebound is expected in all provinces except in Atlantic Canada.

Ontario, P.E.I. and Saskatchewan was expected to face the steepest declines this year, falling by more than 21 per cent, while B.C., Alberta and Manitoba are expected to fare the best with declines of less than five per cent.

Average home prices are expected to outpace the rate of inflation this year in the Prairies, and Newfoundland and Labrador and be in line with inflation in 2014, except in P.E.I. and Quebec, which will see modest price growth.

Single-detached housing starts are relatively more stable than multiple-family units.

The CMHC forecast mirrors the outlook presented last week by the Canadian real estate industry, which said Canada’s housing market is showing signs of stability ahead of a possible rebound in 2014.

The Canadian Real Estate Association — whose members operate the MLS system — said the number of homes sold so far this year is slightly higher than projected, although it still expects fewer sales this year than in 2012.

Douglas Porter, chief economist with BMO Capital Markets, said the figures presented CREA showed there been at least a delay in the doom and gloom that has been anticipated for the Canadian housing sector.

“Overall, this is relatively encouraging news,” Porter said. “If anything, the surprise has been how healthy the housing market has been.”

hrichards@bprda.wpengine.com

With files by The Canadian Press.

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