Housing Starts to Stabilize, Home Sales to Strengthen and Prices to Recover

Ottawa, October 24, 2019

CMHC`s national housing outlook calls for housing starts to stabilize over the next two years following two years of declines. The 2020 Housing Market Outlook released today by Canada Mortgage and Housing Corporation (CMHC) also forecasts income and population growth will support a rebound in home sales and prices.

“Housing starts are projected to stabilize in 2020 and 2021 at levels in line with long-run averages,” said Bob Dugan, CMHC’s Chief Economist. This follows two years of declines from elevated levels in 2017. Resale activity and house prices are expected to fully recover from recent declines.”

The CMHC outlook forecasts Canadian housing market activity for the years of 2020 and 2021.

Transcript

With the release of our housing market outlook, we are providing an updated forecast on housing market activity.

Housing starts are expected to decline in 2019 and then stabilize in 2020 (and 2021) at levels closer to the 1985-2018 average than has been the case in recent years.

Sales growth will be modest in 2019 and average prices are expected to decline for a second consecutive year.

However, sales and prices will start recovering in 2020, offsetting recent declines by the end of the forecast in 2021.

Economic and demographic conditions will remain supportive of housing activity, encouraging recovery in housing activity from the weakness that followed the highs of 2016 and 2017

In particular, we expect housing starts to stabilize at a level in line with household formation and GDP growth in 2020 and 2021; in addition, we expect household disposable income growth to support renewed sales and prices over the same period.

Amongst the risks to our outlook, we continue to see vulnerabilities related to international trade tensions.

Global trade tensions continue to impact business confidence,tempering economic conditions and increasing the risk of slower economic and housing market activity.

High household indebtedness remains an important vulnerability as well.

If interest rates or unemployment were to rise more than expected, heavily indebted households could face greater constraints on their budgets.

This could place downward pressure on the economy and housing activity.

For more details on the housing market outlook, visit cmhc.ca.

Highlights:

Housing starts are expected to register a second consecutive annual decline in 2019 before stabilizing in 2020 and 2021. Starts for single-detached and multi-unit housing types will remain below the peaks observed in 2017 (for single-detached starts) and 2018 (for multi-unit starts).
Existing home sales are forecasted to stay near their 2018 levels until the end of 2019. Home sales will increase in 2020 and 2021 offsetting the declines observed since 2016, reflecting household disposable income growth.
The average MLS^® price is expected to decline for a second consecutive year from the recent high registered in 2017. Positive price growth is expected to resume in 2020 and 2021, driving the average price above its 2017 level by the end of the forecast horizon. Household disposable income growth and rates of household formation will support price growth.
In terms of risks to our outlook, we continue to see vulnerabilities related to international trade tensions and high household indebtedness which present risks to economic activity and housing market stability.

The HMO includes a report for Canada and 19 major centres. These reports can be downloaded from our website.

CMHC helps Canadians meet their housing needs. As Canada’s authority on housing, we contribute to the stability of the housing market and financial system, provide support for Canadians in housing need, and offer objective housing research and advice to Canadian governments, consumers and the housing industry. Prudent risk management, strong corporate governance and transparency are cornerstones of our operations.

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