CMHC Housing Market Outlook
Greater Toronto Area
Fall 2008

CMHC Housing Market Information (CMHC website)
Download the full CMHC Toronto report: Fall 2008 (pdf)

CMHC Toronto report (Fall 2008)
Highlights from the report:
Existing Home Market
& Economic Trends
(pages 3-6)

Existing Home Sales Off the Peak

Over the next two years, the number of home sales under the MLS® system in the GTA will trend lower off the 2007 record high. Sales will moderate due to softer economic conditions domestically and elevated home prices. In 2008, home sales will be down to 82,000 units, moderating by 14 percent from a year ago. In 2009, sales will edge lower by 8.5 per cent to 75,000.

Slower growth in jobs and earnings will especially impact would-be first-time buyers, who are generally more sensitive to changes in economic conditions and who face a wider gap between ownership and rental costs.

In addition to the labour market situation, a long phase of home price growth well above the general rate of inflation and household incomes has ultimately moderated demand for homeownership. Slower price growth over the next year will help this situation somewhat, but on net will still result in an increased number of buyers putting their home buying decision on hold.

While home sales will be off record levels, continued steady net-migration and low borrowing rates will keep home buying activity in the GTA in line with the average over the past ten years.

More Supply, Moderate Price Growth

New listings will continue to grow to reach a record-high level in 2008. The trend will flatten out in 2009. At a maturing stage of the housing cycle, when the rate of price increase usually slows, an increasing number of homeowners list their homes for sale to realize the equity gains accumulated during the expansion phase of the price cycle. The trend in listings growth will eventually slow and then change direction, however, as fewer home owners are able to sell their homes for the anticipated values for their properties. This will begin to happen toward the end of 2009.

The relationship between sales and new listings speaks to the level of choice in the existing home market. With sales lower this year and the level of new listings continuing to grow, buyers have had more homes to choose from. This increased choice has meant that offers below the asking price have been more common. As a result, annual price growth in the GTA has moderated. In 2009, the level of new listings is expected to level off and start declining toward the end of the year. While the sales-to-new listings ratio will continue to decline, it will do so at a diminishing rate. The resale market will remain balanced, with prices growing in line with inflation.

The average home price in 2008 will be up 2.6 per cent to $387,000. By the end of 2009, the average price of home will reach $394,000 – up 1.8 per cent. While positive, these forecast growth rates are much more moderate than what was experienced on average over the past ten years, including the seven per cent growth rate experienced in 2007.

Not all housing types will experience the same moderation in price growth over the next year. Condominium apartments in the central Toronto area are a good example of this. The central Toronto area remains a tighter market than the region as a whole. While condo buyers in the central area have experienced more choice this year, seller’s market conditions still persist. As choice continues to increase in 2009, price growth will moderate, but will still remain above the average for the GTA as a whole.

The First Time Buyers Niche Gets Smaller

Over the long term, first-time buyers will remain the most important factor driving sustained demand for home ownership in the GTA. As immigration into Canada and the GTA increases over the next two decades, many of these households will be pointed in very short order towards the purchase of a new home. In the short-term, however, the level of first-time buying activity is subject to the economic cycle.

The number of households purchasing their first home will be trending lower in 2009. Softer labour market conditions along with elevated home prices will affect the ability of some first-time buyers to make a home purchase.

Based on CMHC’s Renovation and Home Purchase Survey, the percentage of intended home purchases accounted for by first-time buyers declined to 40 per cent for 2008 compared to 47 per cent in 2007. This share will decline further in 2009.

Economic Trends: Toronto Will Continue to Create Jobs

Employers in the GTA have persevered in 2008. The rate of job growth will be 1.8 per cent in 2008 – above the average for Ontario. In 2009, job growth will remain positive, but the rate of growth will moderate to one per cent. Job growth will come from the service sector.

As labour market conditions in the GTA remain tight through the end of 2009, wages and salaries will continue to grow slightly above the rate of inflation. With the unemployment rate hovering around seven per cent, many employers in the service sector will be offering wages above the rate of inflation.

Mortgage Rates

Mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one year posted mortgage rate will be in the 6.00-6.75 per cent range, while three and five year posted mortgage rates are forecast to be in the 6.50- 7.25 per cent range.


 
 
 
Wendy Smith, Sales Representative
DIRECT LINE 416.471.9373
wendy@wendysmithtoronto.com
Wendy Smith's Toronto: HOME
  Sutton Group — Associates Realty Inc., Brokerage
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358 Davenport Road Toronto, ON M5R 1K6
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