Housing market intelligence you can count on Housing Market Overview Peter Friedmann General...

Housing market intelligence you can count on

Housing Market Overview

Peter Friedmann General Manager, Ontario Business CentreCMHC

March 19, 2014


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


The Macro Influencers



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)


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


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


Ontario Exports Bigger Piece of GDP Pie

33% of GDP

Housing

Exports

20% of GDP

Source: Statistics Canada Provincial Economic Accounts, CMHC


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



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)


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



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



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



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+




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


Natural Increase InternationalInter Prov Intra ProvPopulation Change



Immigration Adds to Perth County Population

-600 -400 -200 0 200 400 600

MiddlesexAlberta

TorontoBritish Columbia

BruceOttawa

HuronPeel

OxfordYork

WellingtonForeign



Interest Rates and Mortgage Rates


Long Term Rates Will Rise Despite Stable Overnight Rate

US & CDN 10yr bond yields %


0

1

2

3

4

5

6

7

2000 2002 2004 2006 2008 2010 2012 2014

CDN

US



Fixed Rate Mortgages Dominate – Only Some Will Reset

32%

2%

68%

Variable Mix Fixed

Source: The FIRM Survey – Winter 2013 Outstanding Mortgages


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


Resale Market



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



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


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


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%



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


New Construction Market



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



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



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



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


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


Builders Started Fewer Apartment Projects in 2013

Source: CMHC

0

5000

10000

15000

20000

25000

30000

35000

Vancouver Calgary Toronto Montreal

2012

2013


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


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


Households and Housing Stock Indicators



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



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



55% of Stratford Housing Stock are Single-Detached

0%

10%

20%

30%

40%

50%

60%

Single Semi Row Apartment




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




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




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


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

Housing market intelligence you can count on Housing Market Overview Peter Friedmann General...

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