JUST THE FACTS
just the facts Canada’s Housing Market Highlights........................................................................................................2 The Housing Market in Canada – 2007-2012...................................................2 Is there a “Housing Bubble” in Canada?...........................................................2 Average Canadian Home Prices - Chart............................................................3 Average Mortgage Payment as a Percentage of Disposable . Income per Worker - Chart...............................................................................4
Date modified: May 29, 2012
Canada’s Housing M arket
Highlights: ■■ ■■
Looking ahead, total housing starts are expected to moderate over the next year and half. Over the course of 2011 and early 2012, new listings outpaced existing home sales. As a consequence, the resale market remained in balanced market conditions. Moving forward, we expect balanced market conditions to prevail and the average MLS® price to remain relatively stable at a rate roughly in line with inflation to the end of 2013.
The Housing Market in Canada – 2007-2012 Over the past several years, house prices in Canada have reflected significant swings in housing market conditions. For example, the annual average price of existing homes decreased by about 0.7 per cent in 2008 compared to 2007 as demand for existing homes weakened during the economic downturn. More significantly, however, house prices decreased by about 11 per cent from the peak of the fourth quarter of 2007 to the trough of the fourth quarter of 2008. Subsequently, the combination of an improving economy and very low mortgage rates set the stage for a rebound in housing demand in 2009. As a result of stronger demand, house prices in Canada increased from 2009 through 2011 and early 2012. This recent experience demonstrates how, in the short and medium term, changes in the economic and demographic fundamentals that support the housing market have an impact on house prices. Low mortgage rates, employment and income growth can all increase demand for homeownership and put upward pressure on house prices. Conversely, house prices can be subject to downward pressure during periods of economic uncertainty. A key determinant of home price movements is the extent to which existing home sales are in balance with new listings. Since the beginning of 2011, new listings steadily outpaced existing home sales. As a consequence, the resale market has moved from sellers’ to balanced market conditions. Moving forward, balanced market conditions are expected to prevail and the average MLS® price is anticipated to grow in line with inflation through 2013.
Is there a “Housing Bubble” in Canada? Overall, there are strong demographic and economic factors supporting the Canadian housing market, including growth in employment, net migration and low interest rates. However, there are some centres that CMHC is monitoring more closely. CMHC uses many of the key indicators identified in the economic literature to help assess house prices. These indicators look at mismatches between supply and demand, accelerating trends in house prices, and valuation of house prices that may be higher than what demographic and economic fundamentals would suggest.
Canada Mortgage and Housing Corporation
2
Canada’s Housing M arket
Although it has been suggested that Canadian housing markets will experience the same severe adjustments as U.S. markets did. Housing markets in Canada are less exposed to some of the risks that shaped the recent U.S. experience. The sub-prime market, in particular, never took hold in Canada to the extent that it did in the U.S. Lending standards have remained rigorous in Canada. Indeed, the rate of mortgage arrears in Canada is less than one half of one per cent, according to the Canadian Bankers Association (CBA) backgrounder, Canada’s Strong Banking System: Benefitting Canadians, which also reports that the rate of arrears in the US is more than ten times higher than in Canada. For more information see (link to MAC forecasts and analysis): http://www.cmhc.ca/en/hoficlincl/homain/foan/index.cfm
Average Canadian Home Prices (updated 2011 chart to be provided in May 2012)
To view previous years and compare Canadian markets, visit CMHC’s interactive chart at: . http://www.cmhc-schl.gc.ca/en/corp/about/cahoob/.
Canada Mortgage and Housing Corporation
3
Canada’s Housing M arket
Average Mortgage Payment* as a Percentage of Personal Disposable Income per Worker
* The monthly mortgage payment is calculated using the prevailing average MLS® price and the five-year fixed mortgage posted rate prevailing in each period, assuming a 25 per cent down payment and 25 year amortization. The income figure is personal disposable (after tax) income per worker. Source: CMHC, adapted from Statistics Canada (CANSIM), unpublished data, and CREA (MLS®).
Canada Mortgage and Housing Corporation
4
Date modified: May 29, 2012
Canada’s Housing M arket
Highlights: ■■ ■■
Looking ahead, total housing starts are expected to moderate over the next year and half. Over the course of 2011 and early 2012, new listings outpaced existing home sales. As a consequence, the resale market remained in balanced market conditions. Moving forward, we expect balanced market conditions to prevail and the average MLS® price to remain relatively stable at a rate roughly in line with inflation to the end of 2013.
The Housing Market in Canada – 2007-2012 Over the past several years, house prices in Canada have reflected significant swings in housing market conditions. For example, the annual average price of existing homes decreased by about 0.7 per cent in 2008 compared to 2007 as demand for existing homes weakened during the economic downturn. More significantly, however, house prices decreased by about 11 per cent from the peak of the fourth quarter of 2007 to the trough of the fourth quarter of 2008. Subsequently, the combination of an improving economy and very low mortgage rates set the stage for a rebound in housing demand in 2009. As a result of stronger demand, house prices in Canada increased from 2009 through 2011 and early 2012. This recent experience demonstrates how, in the short and medium term, changes in the economic and demographic fundamentals that support the housing market have an impact on house prices. Low mortgage rates, employment and income growth can all increase demand for homeownership and put upward pressure on house prices. Conversely, house prices can be subject to downward pressure during periods of economic uncertainty. A key determinant of home price movements is the extent to which existing home sales are in balance with new listings. Since the beginning of 2011, new listings steadily outpaced existing home sales. As a consequence, the resale market has moved from sellers’ to balanced market conditions. Moving forward, balanced market conditions are expected to prevail and the average MLS® price is anticipated to grow in line with inflation through 2013.
Is there a “Housing Bubble” in Canada? Overall, there are strong demographic and economic factors supporting the Canadian housing market, including growth in employment, net migration and low interest rates. However, there are some centres that CMHC is monitoring more closely. CMHC uses many of the key indicators identified in the economic literature to help assess house prices. These indicators look at mismatches between supply and demand, accelerating trends in house prices, and valuation of house prices that may be higher than what demographic and economic fundamentals would suggest.
Canada Mortgage and Housing Corporation
2
Canada’s Housing M arket
Although it has been suggested that Canadian housing markets will experience the same severe adjustments as U.S. markets did. Housing markets in Canada are less exposed to some of the risks that shaped the recent U.S. experience. The sub-prime market, in particular, never took hold in Canada to the extent that it did in the U.S. Lending standards have remained rigorous in Canada. Indeed, the rate of mortgage arrears in Canada is less than one half of one per cent, according to the Canadian Bankers Association (CBA) backgrounder, Canada’s Strong Banking System: Benefitting Canadians, which also reports that the rate of arrears in the US is more than ten times higher than in Canada. For more information see (link to MAC forecasts and analysis): http://www.cmhc.ca/en/hoficlincl/homain/foan/index.cfm
Average Canadian Home Prices (updated 2011 chart to be provided in May 2012)
To view previous years and compare Canadian markets, visit CMHC’s interactive chart at: . http://www.cmhc-schl.gc.ca/en/corp/about/cahoob/.
Canada Mortgage and Housing Corporation
3
Canada’s Housing M arket
Average Mortgage Payment* as a Percentage of Personal Disposable Income per Worker
* The monthly mortgage payment is calculated using the prevailing average MLS® price and the five-year fixed mortgage posted rate prevailing in each period, assuming a 25 per cent down payment and 25 year amortization. The income figure is personal disposable (after tax) income per worker. Source: CMHC, adapted from Statistics Canada (CANSIM), unpublished data, and CREA (MLS®).
Canada Mortgage and Housing Corporation
4
