Housing market intelligence you can count on Housing Market Overview Peter Friedmann General Manager, Ontario Business Centre CMHC March 19, 2014.
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Housing market intelligence you can count on
Housing Market Overview
Peter Friedmann General Manager, Ontario Business CentreCMHC
March 19, 2014
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CANADA MORTGAGE AND HOUSING CORPORATION
Outline of Presentation
• The Macro Influencers• Interest Rates and Mortgage Rates• Resale Market• New Construction Market• Housing Stock Indicators• Final Thoughts
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The Macro Influencers
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CANADA MORTGAGE AND HOUSING CORPORATION
GDP Growth
0.0
1.0
2.0
3.0
4.0
5.0
6.0
NFLD PEI NS NB QUE ONT MAN SASK ALTA BC CAN
Source: CMHC
2013(E)
2014(F)
2015(F)
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Weaker Cdn$ Also Trade SupportiveUS per Cdn$
Source: Statistics Canada
0.860.880.9
0.920.940.960.98
11.021.041.061.08
2011 2012 2013
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US Industrial Sector Leading
Year to Date Manufacturing Index - PMI (index>50 = expansion, index<50= contraction)
Source: JP Morgan, MARKIT
46
47
48
49
50
51
52
53
PMI Europe PMI Japan PMI US PMI China
Expansion
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Ontario Exports Bigger Piece of GDP Pie
33% of GDP
Housing
Exports
20% of GDP
Source: Statistics Canada Provincial Economic Accounts, CMHC
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Ontario Benefits Most From Improving US Economy
0.86
0.88
0.9
0.92
0.94
0.96
0.98
1
1.02
MAN NFLD SAS QUE BC ALTA ONTSource: Statistics Canada, CMHC calculations
Correlation Between US GDP & Provincial GDP
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CANADA MORTGAGE AND HOUSING CORPORATION
Outflows To West From Rest of Canada Slowing
Net Migration Between Provinces
Source: CMHC Forecast, Statistics Canada
-20000 -10000 0 10000 20000 30000 40000 50000
BC
ALTA
ONT
QUE
NFLD 2014(F)
2013(E)
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Ontario Businesses Gaining Confidence
Source: Canadian Federation of Independent Business (CFIB)
CFIB Business Confidence Index
61.5
62.0
62.5
63.0
63.5
64.0
64.5
65.0
65.5
66.0
Ontario Canada
Jan-12
Jan-13
Jan-14
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Stratford-Bruce ER580 Employment
120
125
130
135
140
145
150
155
160
165
170
88 90 92 94 96 98 00 02 04 06 08 10 12 14
Source: Statistics Canada, LFS, Stratford-Bruce ER580
Employment
Trend
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Stratford CA Population Aging
-30%
-20%
-10%
0%
10%
20%
30%
40%
Source: Statistics Canada, Census of Canada
Ontario
Stratford CA
Population Change, 2006-2011
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Young Adults Leaving Perth County in Last 5 Years
-1000
-800
-600
-400
-200
0
200
400
0-17 18-24 25-44 45-64 65+
Source: Statistics Canada
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Perth County Migration Gains in 2011-2013
-400
-300
-200
-100
0
100
200
300
400
500
600
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Source: Statistics Canada
Natural Increase InternationalInter Prov Intra ProvPopulation Change
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Immigration Adds to Perth County Population
-600 -400 -200 0 200 400 600
MiddlesexAlberta
TorontoBritish Columbia
BruceOttawa
HuronPeel
OxfordYork
WellingtonForeign
Source: Statistics Canada
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Interest Rates and Mortgage Rates
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Long Term Rates Will Rise Despite Stable Overnight Rate
US & CDN 10yr bond yields %
Source: Statistics Canada
0
1
2
3
4
5
6
7
2000 2002 2004 2006 2008 2010 2012 2014
CDN
US
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Fixed Rate Mortgages Dominate – Only Some Will Reset
32%
2%
68%
Variable Mix Fixed
Source: The FIRM Survey – Winter 2013 Outstanding Mortgages
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Existing Mortgages Will Reset Below Contract Rate
Average Contract Mortgage Rate, 5yr Discounted Fixed - CANADA
Year of Mortgage Reset
Source: CMHC, FIRM
4.14.2
3
3.2
3.4
3.6
3.8
4
4.2
4.4
2013 2014
Reset Rate Range
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Resale Market
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Ontario MLS® Sales
50
100
150
200
250
88 90 92 94 96 98 00 02 04 06 08 10 126-m
onth
MA
SA
AR
Sale
s, 0
00s
Source: CREA
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Ontario vs. Huron Perth MLS® Sales
0
500
1000
1500
2000
2500
0
50000
100000
150000
200000
250000
88 90 92 94 96 98 00 02 04 06 08 10 12
SAA
R S
ales
SAA
R S
ales
Source: CREA
Ontario
Huron Perth
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Affordability Varies Across the Province
Actual Income as % of Required Income to Purchase Resale Home - 2014
Source: CMHC Forecast , Statistics Canada, CREA
0 50 100 150 200 250
Windsor
London
Thunder Bay
Toronto
Hamilton
Barrie
Oshawa
Ottawa
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Tighter Markets in Western Ontario
Sales to New Listings Ratio, 2013
Source: CREA, CMHC
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
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Huron Perth A High-End Balanced Market
Source: CMHC, CREA
Sales to New Listings Ratio
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
2005 2006 2007 2008 2009 2010 2011 2012 2013
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New Construction Market
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Ontario Housing Starts
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14(F)
Source: CMHC
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Stratford Housing Starts
Starts
0
20
40
60
80
100
120
140
160
180
200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: CMHC Starts and Completions Survey
Apartments
Semi/Row
Singles
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Housing Starts, % Change 2012-2013
-60.0% -50.0% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0%
STR
KCW
TOR
HAM
LON
BRN
WIN
SCN
GUE
Source: CMHC
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Single Detached Prices Continue to Increase in KCW
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: CMHC, Market Absorption Survey
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High Number of Apartment Units Under Construction
0
10000
20000
30000
40000
50000
60000
70000
80000
2005 2007 2009 2011 2013
Apartment Units Under Construction - ONTARIO
Source: CMHC
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Builders Started Fewer Apartment Projects in 2013
Source: CMHC
0
5000
10000
15000
20000
25000
30000
35000
Vancouver Calgary Toronto Montreal
2012
2013
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Condo Investor Contributing to Supply% Estimate of Condominium Apartment Universe Held By Investors
Source: CMHC Fall Rental Market Survey
22.2 22.6
26.1
19.320.7
24
0
5
10
15
20
25
30
2011 2012 2013
Toronto
Ottawa
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Conventional Rental Supply Falling Short of Demand
Source: CMHC Forecast 2011-15, Statistics Canada
0
5000
10000
15000
20000
25000
Rental Completions Rental Household Formation
2006-11
2011-15
Completions, Household Formation - ONTARIO
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Households and Housing Stock Indicators
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Ontario CMA Vacancy Rates, October 2013
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
WIN
ING
SCN
STR
HAM
LON
BRN
KCW
WOO
GUE
TOR
Source: CMHC
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68% of Stratford Households Own
0%
10%
20%
30%
40%
50%
60%
70%
80%
Under 25 25-34 35-44 45-54 55-64 65-74 75+
Source: National Household Survey, 2011
Owner Renter
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55% of Stratford Housing Stock are Single-Detached
0%
10%
20%
30%
40%
50%
60%
Single Semi Row Apartment
Source: National Household Survey, 2011
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80% of Stratford Housing Stock Built Prior to 1990
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
1920 or before
1921-1945
1946-1960
1961-1970
1971-1980
1981-1990
1991-2000
2001-2011
Source: National Household Survey, 2011
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Stratford Household Income by Age
$0$10,000$20,000$30,000$40,000$50,000$60,000$70,000$80,000$90,000
$100,000
Source: National Household Survey, 2011
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RISKS TO THE HOUSING OUTLOOK
• Fiscal uncertainty impacts financial markets, business confidence
• China growth decelerates faster than expected• Rotation from domestic to trade driven growth stalls• Rates move higher than expected• Condo apartment registrations grow faster
UPSIDE RISKS• US economic growth accelerates above forecast• Canadian interest rates move lower
DOWNSIDE RISKS
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FINAL THOUGHTS• Developed Economies Gaining Momentum – US
Leads
• West Will Lead But Performance Gap is Narrowing
• Resale Housing Will Lead - Starts Gain Momentum in Longer Term As Echo Boomers Mature
• Empty Nesters Contribute To Ownership Demand in Short Run
• Short Term Rates on Hold - Long Term Rates Will Gradually Creep Up
• The challenge for Stratford home builders is to adapt to the aging demographics
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