The declining demand for new homes and retarded building activities are a sure sign of the fact that the number of new constructions have dropped significantly throughout different sectors in Canada, which was a active and lively housing and mortgage market of late. Recently, the Canada Mortgage and Housing Corporation (CMHC) had published a report saying that in September, the starts of the periodic adjusted amended housing annual rate were 186,400. This was a decline from the previous month's figures (August 2010) which was reported to be 189,300.
According to a senior economist at the federal Crown Corporation, Bill Clark, the stagnation in the housing market is, however, not of much worry. On the contrary, he considers this to be an indication of the wellbeing in the housing market since activity has been restrained at a more viable plane. Clark said that as a matter of fact people take it for granted that when things move somewhat at a slower pace, there ought to be some negative aspect. However, it is precisely quite fine since they are coming more in accordance with the general demographic demand in the country.
Any decrease in new housing starts that generally protect a cooling tendency by approximately six months point to the fact that builders are holding back construction activities as they find the demand dwindling with a view to avoid creating a situation where there is a surplus of unsold houses in the market.
Precisely speaking, the volumes of home sales commenced to fall since this spring, which is otherwise one of the busiest periods in the housing market. This was followed by a few months of abnormal vigorous activity during the final months of last year when the economy of Canada began to show signs of recuperation from the gloom of one of the worst ever global economic recessions.
Since the consumers were feeling more positive regarding spending their money, many of them flocked the housing market during the last quarter of 2009 as well as the first quarter of 2010 with a view to overcome the anticipated augmentation in mortgage rates and sales tax rates in three Canadian provinces accompanied by more stringent federal rules related to qualifying for mortgages, which eventually came into effect from April this year.
According to Bill Clark's observations, though the mortgage rates have increased steadily higher during the recent months, they are still close to the historically low levels - that was effected by the Canadian finance ministry with a view to keep the mortgage market rolling. Clark, however, admitted that though the present mortgage rates were not too high, they are also not at the same historically low levels that were seen during the early months of this 2010. He pointed out that several people were actually a little surprised by the strength during the initial months of 2010. At the same time Clark said that one should not forget the fact that much of this was owing to the people saying that well, they have the harmonized Sales Tax (HST) about to happen and this was responsible for an increase in demand for new houses as well as mortgages during that brief period.
Meanwhile, Robert Kavcic, an economist at the Bank of Montreal, said that the intensity of September housing starts was somewhat improved that what was anticipated. At the same time, he noted that the downhill trend in the construction sector in Canada is quite obvious. According to Kavcic generally the housing starts ought to keep on softening during the ensuing few quarters and be pulled down by the cooling that was witnesses on the demand side of the Canadian housing market.
The Bank of Montreal economist forecasts the impending data on the present home sales will reveal a 20 per cent decline from one year to the next in September. At the same time, Kavcic anticipates that new home starts will stay close to approximately 175,000 during the ensuing months. He said that this figure is fairly balanced vis-à-vis the new household formation rate.
In the meantime, the Canada Mortgage and Housing Corporation (CMHC) has said that there was a 3.3 per cent drop in the single starts in urban areas and this was primarily owing to the general decline in the construction activities. However, CMHC notes that there were no changes in the urban multiple starts during September with the figures touching 99,600. Nevertheless, single housing starts in the urban areas dropped by 8.1 per cent to stand at 63,000.
Notwithstanding the decline in the housing market, the prices of homes in the urban locales in Canada, particularly Toronto and Vancouver, still remain highly exorbitant as many are finding it hard to manage to pay for a separate home in these high level housing markets.
Now, even the single unit homes that are considered to be a more stable and dependable pointer of the general vigor of the new housing market have declined 33 per cent from their peak in March 2010. On the other hand, multiple-unit housing starts, such as condos and apartments, have increased 32 per cent. Ontario and Atlantic Canada witnessed the worst decrease in the urban housing starts, while they increased in other places, such as Quebec, B.C. and the Prairie region. It may be noted that earlier, it was forecast that the rural housing starts in September would be at a yearly rate of 23,200.