CMHC Reports Annual Pace of Housing Starts Slowed in December
Canada Mortgage and Housing Corp. says the annual pace of housing starts in December slowed 5% compared with November. The national housing agency says the seasonally adjusted annual rate of housing starts in December was 248,625 units compared with 263,022 in November.
The drop came as the annual pace of urban starts fell 5% to 227,708. The rate of multi-unit urban starts dropped 4% to 182,850, while the pace of single-detached urban starts fell 11% to 44,858. Rural starts were estimated at a seasonally adjusted annual rate of 20,917 units for December.
The six-month moving average of the monthly seasonally adjusted annual rates of housing starts was 269,930 in December, down 1% from 273,801 in November.
CREA Announces That Canadian Home Sales Edged Up at the End of 2022 but Predicts That They Will Decline in 2023 Along With Prices
Highlights for the end of 2022:
- National home sales rose 1.3% month-over-month in December.
- Actual (not seasonally adjusted) monthly activity came in 39.1% below December 2021.
- The number of newly listed properties dropped 6.4% month-over-month.
- The MLS® Home Price Index (HPI) declined by 1.6% month-over-month and was down 7.5% year-over-year.
- The actual (not seasonally adjusted) national average sale price posted a 12% year-over-year decline in December.
“The housing market story of 2022 was about high inflation and rising interest rates. The 2023 market will depend on the timing and extent those factors move back in the other direction,” said Shaun Cathcart, CREA’s Senior Economist. “Demand for housing continues to grow and supply remains the biggest issue across the entire spectrum. Whether that plays out in the rental market in 2023 or shifts back over into the ownership space is a matter of how quickly the Bank of Canada can get inflation under control and starts turning the dial back down on borrowing costs.”
Expectations for 2023
According to a new forecast released by the Canadian Real Estate Association, the average price of homes sold in Canada will fall 5.9% on an annual basis to $662,103 in 2023, but will bounce back modestly in 2024. CREA also expects average prices to drop to $662,103 in 2023 but rebound by 3.5% to $685,056 in 2024.
Christopher Alexander, president of RE/MAX Canada believes that national home sales are going to see a “rough start to the year…The thing that’s really concerning is the inventory levels that we’re seeing, which is very, very interesting because never before has a path towards a potential recession not coincided with a big rise in housing inventory. It’s actually gone down,” Alexander said in an interview.
According to CREA’s forecast, there are expected to be 495,858 transactions via Canadian MLS Systems in 2023, a decrease of 0.5% from 2022.
A 10.2% increase in home sales is expected across the country in 2024, as markets trend towards recovery, however, this would still be below the figures for 2020 and 2021.
Alexander added that despite the perception that the market is unfavourable for sellers, buyers won’t stay on the sidelines forever. “There is going to come a point when people can’t put their plans on hold anymore, or they look at buying as a more affordable option versus renting because rents are so high,” Alexander said. “Despite higher mortgage rates, the monthly payments versus renting are more attractive so I think we’re gonna see a shift from renting to buying somewhere towards the end of the spring this year.”
To Cathcart, 2023 looks like a “turnaround year, but not a recovery year.”
“We’re gonna stem the bleeding and start to move our way back up,” he said in an interview. “We’re hoping that a lot of these measures in the housing market are going to stabilize and so I think that’s going to start to bring some people up off the sidelines — but as far as getting right back to a normal market, where there’s a lot of first-time homebuyers, I think that rates are going to have to be lower and they’re not going to be lower until 2024.”
Across Canada, home prices remain mixed with more expensive markets, such as British Columbia and Ontario, cooling off. In the meantime, data from CREA shows that the price of homes has been much more stable in Alberta, Saskatchewan and Newfoundland and Labrador, with Quebec and the Maritime provinces falling somewhere in between.
Whether the anticipated demand for housing occurs in 2023 or 2024, the need for supply is coming. Alexander does not believe we have what it takes to meet the demand.
“We don’t have the means to keep up with that demand and so we’re really going to need development to speed up and incentives for people to move,” Alexander said. “There’s just so many deterrents for the average homeowner, especially if you’re in Southern Ontario with the land transfer tax as high as it is and limited product pick…There’s just no real incentive for people to move.” Alexander said.