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  • Home prices could fall 7 per cent in 2021, hitting Prairies hard: Moody's forecast
    Business
    The Canadian Press

    Home prices could fall 7 per cent in 2021, hitting Prairies hard: Moody's forecast

    TORONTO — Home prices across Canada could tumble about seven per cent in 2021, as unemployment dampens the hot real estate market, according to a forecast by Moody's Analytics, Inc. There is a “dangerous” oversupply of new, single-family homes in Calgary and Edmonton, on top of affordability issues in Vancouver and Toronto, the financial intelligence company said in a report this week.“The housing market will no longer be able to escape the poor condition of the labor market,” said the report, which used data from a Brookfield Asset Management Inc. subsidiary, RPS Real Property Solutions Inc.“Not even lower interest rates will be enough to save the housing market.”Moody's report did not go into detail on how it created the forecasts, but said that its 2021 home price index also calls for a 6.7 per cent decrease for single-family homes and a 6.5 per cent decline in condo apartments.The prediction from Moody's comes after the Canadian Real Estate Association reported record-shattering home sales in July and August amid low mortgage rates. Some optimists expect this record run to continue. A survey of RE/MAX brokers earlier this month suggested that average residential home prices could rise 4.6 per cent by the end of 2020.But Moody's forecast says the real estate sector will lose its momentum in the first half of 2021, and it’s not alone. Canada Mortgage and Housing Corp. economist Bob Dugan also predicted earlier this week that housing prices will fall going forward.“Moody’s Analytics expects that the shortlived burst of growth in the third quarter will produce too few job gains to meaningfully reduce unemployment,” the report said.For instance, Moody’s said that housing starts - a closely watched statistic that has rebounded sharply this summer - partly reflects investments made before the pandemic. “Builders have spent too much money on the projects to abandon them,” the report said.While home prices would fall in every region under Moody’s model, the impact would be uneven and would favour small, affordable markets. While lower immigration may hurt condos in urban markets, Moody’s suggested that buyers seeking more space may look to Oshawa, Ont. as prices rise in other Toronto suburbs like Mississauga. Moody’s forecast hits especially hard the Prairies, amid fading government supports, the end of mortgage payment deferrals and ongoing struggles with consumer debt and joblessness. The report notes that bankruptcy filings and insolvency proposals have been rising since late 2018.“The pandemic will lead to even further widening in economic inequality, including housing,” said the Moody’s report. “While demand for single-family homes with ample space and large pantries may rise, so too might demand for smaller apartments and condos given the struggle many families will face in saving for a down payment.” If a COVID-19 vaccine comes out in the back half of 2021, the report suggests that home prices will bounce back in 2022.“A second leg downward in the labor and financial markets caused by a renewed wave of COVID-19 this fall and winter could spur a greater than expected decline in house prices,” the report said. “The development and broad deployment of a highly effective coronavirus therapy or vaccine remains the greatest wild card in the forecast. If a vaccine is delayed, then so too is the timing of the recovery.” This report by The Canadian Press was first published Sept. 24, 2020.Anita Balakrishnan, The Canadian Press

  • New home prices had biggest monthly jump since 2017 in August, Statistics Canada says
    Business
    The Canadian Press

    New home prices had biggest monthly jump since 2017 in August, Statistics Canada says

    OTTAWA — Prices of new homes jumped half a per cent in August, the biggest one-month increase since May 2017, Statistics Canada said on Monday.The rising prices stem both from increased demand from homebuyers and higher building costs, according to the index, which scores 27 cities based on how their prices compare to December 2016.Record high lumber prices mean homebuilders could add $5,000 to $10,000 to the cost of building a single-family home.Canada is seeing a lumber shortage as more people look to renovate, and sawmills are producing less amid staffing measures to stop the spread of COVID-19. Earlier this summer, builders reported increased costs from pandemic-related delays.Meanwhile, Statistics Canada says homebuyers are bidding up the prices of new homes, competing over a relatively low inventory of new houses on the market, particularly in Ottawa and Montreal. Data from earlier this summer suggested that more homebuyers were vying for homes with expanded living space, upgrading to detached homes or townhouses.Oshawa, Ont., and Quebec City saw the biggest jump, with price increases of nearly two per cent between July and August. Halifax has also been on a tear, up 1.6 per cent in August — the eighth consecutive monthly increase.A separate report from Statistics Canada on Monday also said that more new homes are under construction, but builders are still below February 2020 levels as they recover from the COVID-19 pandemic.There was a 4.9 per cent uptick in residential construction investments in July, led by $5.1 billion in investments in single-family homes, and spurred on by $4-billion worth of construction spending in Ontario.This report by The Canadian Press was first published Sept. 21, 2020.Anita Balakrishnan, The Canadian Press

  • Housing market 'moderately' vulnerable amid potential overvaluation of homes: CMHC
    Business
    The Canadian Press

    Housing market 'moderately' vulnerable amid potential overvaluation of homes: CMHC

    Canada's housing market experienced overvaluation in some pockets of the country in the spring amid the COVID-19 pandemic, Canada Mortgage and Housing Corp. said in a new report released on Monday.In cities such as Victoria, Moncton and Halifax, there was a widening gap between the selling price of houses and the price economists would expect, based on population growth, disposable income, mortgage rates and employment, the Crown corporation said. That data comes from the agency's housing market assessment, which gives the housing market a grade based on whether homebuilding and rising prices could ultimately affect the stability of the economy. The report doesn’t look at whether homes are affordable — but does try to inform homebuyers and lenders on what would happen to the equity in their homes if a sudden economic shock led to a spike in unemployment, for instance.CMHC says there was a “moderate degree of vulnerability” in the housing market as of the end of June, the same grade the market received in February.The preliminary report shows the slowdown during the height of COVID-19 lockdown measures, but doesn't include the record-setting sales in July and August — nor does the data reflect the ending of government income supports and mortgage payment deferrals.Because the report’s analysis of home price overvaluation relies heavily on analyzing Canadians’ income, the authors suggested that the risk might be underestimated. “The unprecedented income supports from Canadian governments to households (such as the Canada Emergency Response Benefit and the Employment Insurance Benefits) provide relief to individuals experiencing financial hardship due to the COVID-19 crisis. These sources of income are, however, temporary,” said the report.CMHC economist Bob Dugan said that — despite giving the housing market a steady grade this summer — CMHC still expects a severe decline in home sales and in new construction to come as the economy recovers from the pandemic.“I don’t think we are out of the woods yet. I certainly hope our forecast is wrong,” said Dugan in a phone call with reporters.In May and June, CHMC had given a grim outlook for the housing sector, including a steep decline in housing prices. Although realtors have reported record-high home sales and prices in July and August, Dugan said he is not convinced that there is a “sustainable basis” for the current homebuying demand.“I'm not confident yet in walking away from some of our predictions, given the tremendous amount of risk to the economy and housing market,” Dugan said.While Canada’s housing market as a whole does not show signs of overheating, outsized price acceleration or overbuilding, some regions do pose moderate risks, the report said. Winnipeg, Edmonton and Calgary are areas where there is “moderate” risk of overbuilding, CMHC said, looking at both second-quarter data and monthly inventories from July and August.In Edmonton, there has been increased construction of detached homes despite weak employment in the oil sector, while in Winnipeg, incoming migration has slowed, CMHC analysts said. Calgary, meanwhile, has seen row houses and townhomes sit empty as cost-conscious buyers opt for condos instead — leaving the city approaching its 2001 record-high of empty new builds.The report also gave Canada a “low” risk of price acceleration, but noted that prices are rising moderately more quickly in Ottawa and Montreal. In Montreal, the supply of homes for sale was at a 16-year low, pushing prices closer to “problematic” levels.The Ottawa and Montreal housing markets are also at a moderately higher risk of overheating, as are Hamilton, Ont., Quebec City and Moncton, CMHC said. Overheating happens when there is more demand to buy homes than there are listings. “The high economic uncertainty and temporary public health and workplace safety restrictions placed on property showings caused a greater number of sellers to exit the market than buyers,” the report noted.This report by The Canadian Press was first published Sept. 21, 2020.Anita Balakrishnan, The Canadian Press