Housing Market Overview
Peter Friedmann
General Manager, Ontario Business Centre
CMHC
March 19, 2014
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count on
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Outline of Presentation
•
•
•
•
•
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The Macro Influencers
Interest Rates and Mortgage Rates
Resale Market
New Construction Market
Housing Stock Indicators
Final Thoughts
CANADA MORTGAGE AND HOUSING CORPORATION
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The Macro Influencers
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GDP Growth
6.0
2013(E)
5.0
2014(F)
2015(F)
4.0
3.0
2.0
1.0
0.0
NFLD
PEI
NS
NB
QUE
ONT
MAN
SASK
Source: CMHC
CANADA MORTGAGE AND HOUSING CORPORATION
ALTA
BC
CAN
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Weaker Cdn$ Also Trade Supportive
US per Cdn$
1.08
1.06
1.04
1.02
1
0.98
0.96
0.94
0.92
0.9
0.88
0.86
2011
Source: Statistics Canada
2012
2013
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US Industrial Sector Leading
Year to Date Manufacturing Index - PMI (index>50 = expansion, index<50= contraction)
53
Expansion
52
51
50
49
48
47
46
PMI Europe
PMI Japan
Source: JP Morgan, MARKIT
PMI US
PMI China
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Ontario Exports Bigger Piece of GDP Pie
Housing
20% of GDP
Exports
33% of GDP
Source: Statistics Canada Provincial Economic Accounts, CMHC
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Ontario Benefits Most From Improving US
Economy
1.02
Correlation Between US GDP & Provincial GDP
1
0.98
0.96
0.94
0.92
0.9
0.88
0.86
MAN
NFLD
SAS
QUE
Source: Statistics Canada, CMHC calculations
BC
ALTA
ONT
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Outflows To West From Rest of Canada Slowing
NFLD
2014(F)
2013(E)
QUE
ONT
ALTA
BC
-20000
-10000
0
10000
20000
30000
Net Migration Between Provinces
Source: CMHC Forecast, Statistics Canada
CANADA MORTGAGE AND HOUSING CORPORATION
40000
50000
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Ontario Businesses Gaining Confidence
CFIB Business Confidence Index
66.0
65.5
65.0
64.5
64.0
Jan-12
63.5
Jan-13
63.0
Jan-14
62.5
62.0
61.5
Ontar io
Canada
Source: Canadian Federation of Independent Business (CFIB)
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Stratford-Bruce ER580 Employment
170
165
160
Employment
155
Trend
150
145
140
135
130
125
120
88
90
92
94
96
98
00
02
04
06
Source: Statistics Canada, LFS, Stratford-Bruce ER580
CANADA MORTGAGE AND HOUSING CORPORATION
08
10
12
14
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Stratford CA Population Aging
Population Change, 2006-2011
40%
30%
20%
Ontario
Stratford CA
10%
0%
-10%
-20%
-30%
Source: Statistics Canada, Census of Canada
CANADA MORTGAGE AND HOUSING CORPORATION
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Young Adults Leaving Perth County in Last 5 Year
400
200
0
-200
-400
-600
-800
-1000
0-17
18-24
25-44
45-64
Source: Statistics Canada
CANADA MORTGAGE AND HOUSING CORPORATION
65+
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Perth County Migration Gains in 2011-2013
600
Natural Increase
Inter Prov
Population Change
500
400
International
Intra Prov
300
200
100
0
-100
-200
-300
-400
2007-2008
2008-2009
2009-2010
2010-2011
Source: Statistics Canada
CANADA MORTGAGE AND HOUSING CORPORATION
2011-2012
2012-2013
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Immigration Adds to Perth County Population
Foreign
W ellington
York
Oxford
Peel
Huron
Ottawa
Bruce
British Columbia
Toronto
Alberta
Middlesex
-600
-400
-200
0
Source: Statistics Canada
CANADA MORTGAGE AND HOUSING CORPORATION
200
400
600
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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 %
7
6
5
4
3
2
1
0
2000 2002 2004 2006 2008 2010 2012 2014
Source: Statistics Canada
CDN
US
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Fixed Rate Mortgages Dominate – Only Some Will Reset
32%
68%
2%
Variable
Mix
Fixed
Source: The FIRM Survey – Winter 2013 Outstanding Mortgages
CANADA MORTGAGE AND HOUSING CORPORATION
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Existing Mortgages Will Reset Below Contract
Rate
Average Contract Mortgage Rate, 5yr Discounted Fixed - CANADA
4.4
4.2
4.2
4.1
Reset Rate Range
4
3.8
3.6
3.4
3.2
3
2013
2014
Year of Mortgage Reset
Source: CMHC, FIRM
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Resale Market
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Ontario MLS® Sales
250
6-month MA SAAR Sales, 000s
200
150
100
50
88
90
92
94
96
98
00
02
04
06
Source: CREA
CANADA MORTGAGE AND HOUSING CORPORATION
08
10
12
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250000
2500
200000
2000
150000
1500
100000
1000
Ontario
50000
500
Huron Perth
0
0
88 90 92 94 96 98 00 02 04 06 08 10 12
Source: CREA
CANADA MORTGAGE AND HOUSING CORPORATION
SAAR Sales
SAAR Sales
Ontario vs. Huron Perth MLS® Sales
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Affordability Varies Across the Province
Ottawa
Oshawa
Barrie
Hamilton
Toronto
Thunder Bay
London
W indsor
0
50
100
150
200
250
Actual Income as % of Required Income to Purchase Resale Home - 2014
Source: CMHC Forecast , Statistics Canada, CREA
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Tighter Markets in Western Ontario
Sales to New Listings Ratio, 2013
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Source: CREA, CMHC
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Huron Perth A High-End Balanced Market
Sales to New Listings Ratio
80%
75%
70%
65%
60%
55%
50%
45%
40%
35%
30%
2005
2006
2007
2008
2009
2010
2011
Source: CMHC, CREA
CANADA MORTGAGE AND HOUSING CORPORATION
2012
2013
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New Construction Market
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Ontario Housing Starts
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
00
01
02
03
04
05
06
07
08
09
10
Source: CMHC
CANADA MORTGAGE AND HOUSING CORPORATION
11
12
13
14(F)
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Stratford Housing Starts
Starts
200
180
160
140
Apartments
Semi/Row
Singles
120
100
80
60
40
20
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: CMHC Starts and Completions Survey
CANADA MORTGAGE AND HOUSING CORPORATION
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Housing Starts, % Change 2012-2013
GUE
SCN
W IN
BRN
LON
HAM
TOR
KCW
STR
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
Source: CMHC
CANADA MORTGAGE AND HOUSING CORPORATION
10.0%
20.0%
30.0%
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Single Detached Prices Continue to Increase in
KCW
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
00
01
02
03
04
05
06
07
08
09
Source: CMHC, Market Absorption Survey
CANADA MORTGAGE AND HOUSING CORPORATION
10
11
12
13
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High Number of Apartment Units Under
Apartment Units Under Construction - ONTARIO
Construction
80000
70000
60000
50000
40000
30000
20000
10000
0
2005
Source: CMHC
2007
2009
2011
2013
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Builders Started Fewer Apartment Projects in 2013
35000
30000
25000
20000
2012
15000
2013
10000
5000
0
Vancouver
Source: CMHC
Calgar y
Toronto
Montreal
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Condo Investor Contributing to Supply
% Estimate of Condominium Apartment Universe Held By Investors
30
25
20
26.1
22.6
22.2
19.3
24
20.7
15
Toronto
Ottawa
10
5
0
2011
2012
Source: CMHC Fall Rental Market Survey
2013
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Conventional Rental Supply Falling Short of
Demand
Completions, Household Formation - ONTARIO
25000
20000
15000
2006-11
10000
2011-15
5000
0
Rental Completions
Rental Household
Formation
Source: CMHC Forecast 2011-15, Statistics Canada
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Households and Housing Stock Indicators
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Ontario CMA Vacancy Rates, October 2013
TOR
GUE
W OO
KCW
BRN
LON
HAM
STR
SCN
ING
W IN
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Source: CMHC
CANADA MORTGAGE AND HOUSING CORPORATION
6.0%
7.0%
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68% of Stratford Households Own
80%
70%
60%
50%
40%
30%
20%
Owner
10%
Renter
0%
Under 25
25-34
35-44
45-54
55-64
Source: National Household Survey, 2011
CANADA MORTGAGE AND HOUSING CORPORATION
65-74
75+
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55% of Stratford Housing Stock are Single-Detached
60%
50%
40%
30%
20%
10%
0%
Single
Semi
Row
Source: National Household Survey, 2011
CANADA MORTGAGE AND HOUSING CORPORATION
Apartment
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80% of Stratford Housing Stock Built Prior to 199
2001-2011
1991-2000
1981-1990
1971-1980
1961-1970
1946-1960
1921-1945
1920 or before
0.0%
5.0%
10.0%
15.0%
Source: National Household Survey, 2011
CANADA MORTGAGE AND HOUSING CORPORATION
20.0%
25.0%
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Stratford Household Income by Age
$100,000
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
Source: National Household Survey, 2011
CANADA MORTGAGE AND HOUSING CORPORATION
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RISKS TO THE HOUSING OUTLOOK
DOWNSIDE RISKS
•
•
•
•
•
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
CANADA MORTGAGE AND HOUSING CORPORATION
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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