There's been talk of a price "correction" in the Canadian housing market swirling in real estate and economic circles for some time now, but a new report by the Canada Mortgage and Housing Corp says that the much anticipated correction may no longer be in the cards.
The CMHC's third quarter outlook forecasts that the market will ease slightly but "remain steady" through the remainder of 2011 as well as 2012.
The national housing agency recently revised its 2011 housing starts outlook upward to 183,200 from 179,500 in its second quarter report. It also predicted that the number will rise in 2012 to 183,900.
"Housing starts have been strong in the last few months, but are forecast to moderate closer in line with demographic fundamentals," said Mathieu Laberge, Deputy Chief Economist for the CMHC, in a statement issued on Wednesday.
"Despite recent financial uncertainty, factors such as employment, immigration and mortgage rates remain supportive of the Canadian housing sector," he explained.
The report also noted that existing home sales will be in the range of 425,000 to 472,000 units in 2011, which is essentially the same level as 2010. MLS sales in 2012 are anticipated to move up in the range of 407,500 to 510,000 units. If you're looking for something exact, the "point forecasts" for 2011 and 2012 are 446,700 and 458,000, respectively.
The CMHC's report contradicts a TD Economics report issued in July. TD forecast a correction over the next two years, with resale activity declining by 15.2 per cent and average national prices dropping by 10.2 per cent.
Is this the beginning of a serious beef between TD and CMHC economists? Not likely, but the two reports do present diverging views of the future of the Canadian housing market.
According to TD economists, "A combination of more subdued job and household income growth, rising interest rates, the recent tightening in borrowing rules for insured mortgages and fewer first-time home buyers are expected to be the chief culprits behind the slowdown."
Over at CMHC, the outlook is obviously a bit brighter. One of the main reasons behind this is the call later in the summer by Ben Bernanke, Chairman of the US Federal Reserve, for interest rates to remain at rock bottom into 2013.
Because of the rock-bottom interest rates, Laberge expects "mortgage rates will be flat this year and to start increasing only late in 2012."
While it would be fun to have the economists at CMHC and TD meet by the flagpole after school, we suspect that time will resolve this difference in opinions.