CMHC Chief Economist’s views for 2012

Dismissing a recent spike in national unemployment as “temporary,” the chief economist of the Canada Mortgage and Housing Corp. said national economic fundamentals would remain positive in 2012, supporting a modest growth in home resales and prices nationally.

“We think it (the rise in unemployment) is a temporary factor and the trend will be of employment continuing to rise,” said CMHC chief economist Bob Dugan Tuesday while presenting the Crown corporation’s 2012 housing outlook.

The CMHC expects employment levels to continue to support a strong housing market, as will mortgage rates remaining at current low levels. Income growth is expected to remain slow in 2011 and 2012, yet it to will be “moderately supportive of housing,” the report says.

The CMHC says while single-unit housing starts “rebounded coming out of the recession,” and increased in the third quarter of this year, they’re expected to hit 82,200 in 2011, well below the 92,554 starts in 2010, and to slow further before rising again late in 2012.

“The construction of single-detached homes will decrease significantly in all provinces in 2011, with the exception of Saskatchewan,” the report says. “The outlook for 2012 is more positive in British Columbia, Alberta, Manitoba, Quebec and Nova Scotia.”

The unexpected performance of the hot Montreal new condo market is expected to wane next year, leading to a 9.3 per cent drop in total starts to 19,400 units, after a recordbreaking 2011. “What we’ve seen in the past months is not sustainable,” Hughes said of condo-building in Montreal.

Alberta, however, is a different question. Housing starts are expected to increase by 15.3 per cent overall in 2012 following a 6.5 per cent decrease in 2011.

“More affordable condominium projects are now competing with the resale market and enticing some renters to move into new condominium units,”the CMHC report says. “After a slow start to this year, the pace of multi-family starts has picked-up and is expected to edge past last year’s level of production. In 2012, demand is expected to improve with rising incomes and new household formation, raising the level of multi-family production by 14.6 per cent to 10,800 units.”

Nationally, the average price of a resale home is to rise to $368,200 in 2012, with sales to grow modestly between 406,100 and 509,000 units, with a 2012 forecast of 458,500.

Touting the “resilience” of Canada’s housing finance system, CMHC president and CEO Karen Kinsley defended the agency against criticism by “commentators and think tanks,” over the current system. Depending on economic growth, the CMHC is expecting between 161,650 to 206,350 starts nationally in 2012.

“They have challenged the CMHC’s role in the mortgage loan insurance business, arguing that it puts taxpayers at unnecessary risk,” she said. “I want to assure you that CMHC’s insurance business is strong, well capitalized and supports a stable and sound housing finance system for Canada.”

The Ottawa Citizen