Springtime Likely to be Slower due to Tighter Mortgage Restrictions
Springtime is the time of year when flowers are in bloom, romance is in the air, and Realtors start to become very busy! Spring is the be-all-end-all season when it comes to homebuying, as buyers are tired of being cooped up all winter, and the weather allows for hitting the pavement in search of that perfect home. But, Realtors may not be as busy this year, or as excited, as the spring forecast in regards to home-buying is quite a bit slower than what you’d typically expect.
As you can see from the above chart, housing starts were already significantly lower for the country in October than they were in September, dropping a total of 9 per cent. And things don’t look so cheery for next year, either, dropping even further to just 200,000. The recent drop has been blamed mostly on the tighter rules implemented by the federal government, and those same rules are being blamed for the further decrease to come.
“The monthly decrease in total housing starts posted in October was mostly due to a decrease in both single and multiple starts in urban centres in Quebec and the Prairies,” says Mathieu Laberge, deputy chief economist at CMHC. “Multiple starts also declined in many urban centres in Ontario, more than off-setting an increase in such starts in Toronto.”
John Andrew, director of the real estate roundtable at Queen’s University, agrees saying, “The figures provide sound evidence reinforcing the idea that housing markets in most regions and cities are cooling off rapidly. Housing starts are clearly responding to the decrease in new and existing home sales that we’ve seen in most markets over the past few months, especially for condos. I expect the trend to deepen over the remainder of 2012 and likely into 2013.”
Meanwhile, prices are forecasted to experience a decrease as well, although not nearly as severely as housing starts. Not yet hitting the 10 – 15 per cent drop that many economists are expecting for the housing market, prices are set to drop by about 0.1 per cent in 2013, according to Reuters.
So how is this good news for homebuyers or homeowners?
The fact that housing starts are dropping, especially in the most heated markets such as Toronto and Vancouver, mean that there are fewer properties to feed the demand – which puts those trying to sell in an even better spot. Because spring is the busiest time of the year, there will be more demand on the market than most likely any other time of the year in 2013. That demand, coupled with the lack of inventory, will put homeowners in a very good position indeed; and may even get multiple bids back in the market. While too many of these also spell trouble, there’s no doubt that some homeowners would be relieved to receive at least two or three offers on a property.
And let’s remember that even a fall in housing prices wouldn’t sound as terrible as many homeowners think.
As TD economist, Craig Alexander, points out, “A 10 per cent correction sounds scary, in actual fact, this would be a healthy outcome.”