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Prices to level off as housing starts surge

Blog by The Schacter Team | March 3rd, 2010


Housing starts will rise in 2010, putting a lid on home prices this year following their 19-percent surge in 2009, the Canada Mortgage and Housing Corp. said Tuesday.

Between 152,000 to 189,300 housing starts are expected in 2010, up from 149,081 units last year, the national housing agency said.

Describing the current state of affairs as a sellers' market, CMHC said the relative lack of new listings for existing homes has pushed some of the demand into the new home market, "which helps explain the forecast for higher housing starts activity in 2010," CMHC said.

But it added that it expects prices to remain stable in 2010 around the Multiple Listing Service average reached in January this year of $328,537, as the new housing stock brings balance back to the market.

As well, tighter requirements for mortgage lending recently imposed by Ottawa as fears of a housing bubble mounted "will help moderate housing activity as some potential buyers will have to save a larger down payment or consider a less expensive home," said CMHC chief economist Bob Dugan.

CMHC said the strong pace of existing sales over the last three quarters of 2009, a carry-over from the two previous quarters, will not be sustained as pent-up demand is exhausted and financing costs rise later in 2010.

It forecasts existing home sales will be in a range of 455,350 to 509,900 units in 2010.

In 2011, housing starts will total 156,400 to 205,600 units and prices will rise again modestly, it said.