housing market overview

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Housing Market Overview

Peter Friedmann General Manager, Ontario Business CentreCMHC

March 19, 2014


CANADA MORTGAGE AND HOUSING CORPORATION

Outline of Presentation

• The Macro Influencers• Interest Rates and Mortgage Rates• Resale Market• New Construction Market• Housing Stock Indicators• Final Thoughts


The Macro Influencers



GDP Growth

0.0

1.0

2.0

3.0

4.0

5.0

6.0

NFLD PEI NS NB QUE ONT MAN SASK ALTA BC CAN

Source: CMHC

2013(E)2014(F)2015(F)


Weaker Cdn$ Also Trade SupportiveUS per Cdn$

Source: Statistics Canada

0.860.880.9

0.920.940.960.98

11.021.041.061.08

2011 2012 2013


US Industrial Sector LeadingYear to Date Manufacturing Index - PMI (index>50 = expansion, index<50= contraction)

Source: JP Morgan, MARKIT

4647484950515253

PMI Europe PMI Japan PMI US PMI China

Expansion


Ontario Exports Bigger Piece of GDP Pie

33% of GDP

Housing

Exports

20% of GDP

Source: Statistics Canada Provincial Economic Accounts, CMHC


Ontario Benefits Most From Improving US Economy

0.860.880.9

0.920.940.960.98

11.02

MAN NFLD SAS QUE BC ALTA ONTSource: Statistics Canada, CMHC calculations

Correlation Between US GDP & Provincial GDP



Outflows To West From Rest of Canada Slowing

Net Migration Between ProvincesSource: CMHC Forecast, Statistics Canada

-20000 -10000 0 10000 20000 30000 40000 50000

BC

ALTA

ONT

QUE

NFLD 2014(F)2013(E)


Ontario Businesses Gaining Confidence

Source: Canadian Federation of Independent Business (CFIB)

CFIB Business Confidence Index

61.562.062.563.063.564.064.565.065.566.0

Ontario Canada

Jan-12Jan-13Jan-14



Stratford-Bruce ER580 Employment

120125130135140145150155160165170

88 90 92 94 96 98 00 02 04 06 08 10 12 14Source: Statistics Canada, LFS, Stratford-Bruce ER580

EmploymentTrend



Stratford CA Population Aging

-30%

-20%

-10%

0%

10%

20%

30%

40%

Source: Statistics Canada, Census of Canada

OntarioStratford CA

Population Change, 2006-2011



Young Adults Leaving Perth County in Last 5 Years

-1000

-800

-600

-400

-200

0

200

400

0-17 18-24 25-44 45-64 65+




Perth County Migration Gains in 2011-2013

-400-300-200-100

0100200300400500600

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013Source: Statistics Canada

Natural Increase InternationalInter Prov Intra ProvPopulation Change



Immigration Adds to Perth County Population

-600 -400 -200 0 200 400 600

MiddlesexAlberta

TorontoBritish Columbia

BruceOttawa

HuronPeel

OxfordYork

WellingtonForeign



Interest Rates and Mortgage Rates


Long Term Rates Will Rise Despite Stable Overnight RateUS & CDN 10yr bond yields %


01234567

2000 2002 2004 2006 2008 2010 2012 2014

CDNUS



Fixed Rate Mortgages Dominate – Only Some Will Reset

32%

2%68%

Variable Mix Fixed

Source: The FIRM Survey – Winter 2013 Outstanding Mortgages


Existing Mortgages Will Reset Below Contract Rate

Average Contract Mortgage Rate, 5yr Discounted Fixed - CANADA

Year of Mortgage Reset

Source: CMHC, FIRM

4.14.2

33.23.43.63.8

44.24.4

2013 2014

Reset Rate Range


Resale Market



Ontario MLS® Sales

50

100

150

200

250

88 90 92 94 96 98 00 02 04 06 08 10 126-m

onth

MA

SAAR

Sal

es, 0

00s

Source: CREA



Ontario vs. Huron Perth MLS® Sales

0

500

1000

1500

2000

2500

0

50000

100000

150000

200000

250000

88 90 92 94 96 98 00 02 04 06 08 10 12

SAAR

Sales

SAAR

Sales

Source: CREA

OntarioHuron Perth


Affordability Varies Across the Province

Actual Income as % of Required Income to Purchase Resale Home - 2014

Source: CMHC Forecast , Statistics Canada, CREA

0 50 100 150 200 250

WindsorLondon

Thunder BayToronto

HamiltonBarrie

OshawaOttawa


Tighter Markets in Western Ontario Sales to New Listings Ratio, 2013

Source: CREA, CMHC

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%



Huron Perth A High-End Balanced Market

Source: CMHC, CREA

Sales to New Listings Ratio

30%35%40%45%50%55%60%65%70%75%80%

2005 2006 2007 2008 2009 2010 2011 2012 2013


New Construction Market



Ontario Housing Starts

0100002000030000400005000060000700008000090000

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14(F)Source: CMHC



Stratford Housing StartsStarts

020406080

100120140160180200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Source: CMHC Starts and Completions Survey

ApartmentsSemi/RowSingles



Housing Starts, % Change 2012-2013

-60.0% -50.0% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0%

STRKCWTORHAMLONBRNWINSCNGUE

Source: CMHC



Single Detached Prices Continue to Increase in KCW

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

00 01 02 03 04 05 06 07 08 09 10 11 12 13Source: CMHC, Market Absorption Survey


High Number of Apartment Units Under Construction

01000020000300004000050000600007000080000

2005 2007 2009 2011 2013

Apartment Units Under Construction - ONTARIO

Source: CMHC


Builders Started Fewer Apartment Projects in 2013

Source: CMHC

05000

100001500020000250003000035000

Vancouver Calgary Toronto Montreal

20122013


Condo Investor Contributing to Supply% Estimate of Condominium Apartment Universe Held By Investors

Source: CMHC Fall Rental Market Survey

22.2 22.626.1

19.3 20.724

0

5

10

15

20

25

30

2011 2012 2013

TorontoOttawa


Conventional Rental Supply Falling Short of Demand

Source: CMHC Forecast 2011-15, Statistics Canada

0

5000

10000

15000

20000

25000

Rental Completions Rental Household Formation

2006-112011-15

Completions, Household Formation - ONTARIO


Households and Housing Stock Indicators



Ontario CMA Vacancy Rates, October 2013

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%

WININGSCNSTR

HAMLONBRN

KCWWOO

GUETOR

Source: CMHC



68% of Stratford Households Own

0%10%20%30%40%50%60%70%80%

Under 25 25-34 35-44 45-54 55-64 65-74 75+Source: National Household Survey, 2011

Owner Renter



55% of Stratford Housing Stock are Single-Detached

0%

10%

20%

30%

40%

50%

60%

Single Semi Row Apartment

Source: National Household Survey, 2011



80% of Stratford Housing Stock Built Prior to 1990

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

1920 or before1921-19451946-19601961-19701971-19801981-19901991-20002001-2011




Stratford Household Income by Age

$0$10,000$20,000$30,000$40,000$50,000$60,000$70,000$80,000$90,000

$100,000




RISKS TO THE HOUSING OUTLOOK

• Fiscal uncertainty impacts financial markets, business confidence

• China growth decelerates faster than expected• Rotation from domestic to trade driven growth stalls• Rates move higher than expected• Condo apartment registrations grow faster

UPSIDE RISKS• US economic growth accelerates above forecast• Canadian interest rates move lower

DOWNSIDE RISKS


FINAL THOUGHTS• Developed Economies Gaining Momentum – US

Leads

• West Will Lead But Performance Gap is Narrowing

• Resale Housing Will Lead - Starts Gain Momentum in Longer Term As Echo Boomers Mature

• Empty Nesters Contribute To Ownership Demand in Short Run

• Short Term Rates on Hold - Long Term Rates Will Gradually Creep Up

• The challenge for Stratford home builders is to adapt to the aging demographics

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