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Ontario Housing Market Overview: Insights from Peter Friedmann, CMHC

This presentation by Peter Friedmann, General Manager of the Ontario Business Centre at CMHC, provides an in-depth overview of the Ontario housing market as of March 2014. Key topics include macroeconomic influencers such as GDP growth and interest rates, the current state of the resale market, trends in new construction, and housing stock indicators. The discussion highlights Ontario's unique challenges and opportunities within the housing sector, including the impact of demographic shifts and migration patterns, while offering a forward-looking perspective on market dynamics.

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Ontario Housing Market Overview: Insights from Peter Friedmann, CMHC

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  1. Housing Market Overview Peter FriedmannGeneral Manager, Ontario Business Centre CMHC March 19, 2014

  2. Outline of Presentation • The Macro Influencers • Interest Rates and Mortgage Rates • Resale Market • New Construction Market • Housing Stock Indicators • Final Thoughts CANADA MORTGAGE AND HOUSING CORPORATION

  3. The Macro Influencers

  4. GDP Growth CANADA MORTGAGE AND HOUSING CORPORATION

  5. Weaker Cdn$ Also Trade Supportive US per Cdn$ Source: Statistics Canada

  6. US Industrial Sector Leading Year to Date Manufacturing Index - PMI (index>50 = expansion, index<50= contraction) Expansion Source: JP Morgan, MARKIT

  7. Ontario Exports Bigger Piece of GDP Pie Housing 20% of GDP Exports 33% of GDP Source: Statistics Canada Provincial Economic Accounts, CMHC

  8. Ontario Benefits Most From Improving US Economy Correlation Between US GDP & Provincial GDP Source: Statistics Canada, CMHC calculations

  9. Outflows To West From Rest of Canada Slowing Net Migration Between Provinces Source: CMHC Forecast, Statistics Canada CANADA MORTGAGE AND HOUSING CORPORATION

  10. Ontario Businesses Gaining Confidence CFIB Business Confidence Index Source: Canadian Federation of Independent Business (CFIB)

  11. Stratford-Bruce ER580 Employment CANADA MORTGAGE AND HOUSING CORPORATION

  12. Stratford CA Population Aging Population Change, 2006-2011 CANADA MORTGAGE AND HOUSING CORPORATION

  13. Young Adults Leaving Perth County in Last 5 Years CANADA MORTGAGE AND HOUSING CORPORATION

  14. Perth County Migration Gains in 2011-2013 CANADA MORTGAGE AND HOUSING CORPORATION

  15. Immigration Adds to Perth County Population CANADA MORTGAGE AND HOUSING CORPORATION

  16. Interest Rates and Mortgage Rates

  17. Long Term Rates Will Rise Despite Stable Overnight Rate US & CDN 10yr bond yields % Source: Statistics Canada

  18. Fixed Rate Mortgages Dominate – Only Some Will Reset Source: The FIRM Survey – Winter 2013 Outstanding Mortgages CANADA MORTGAGE AND HOUSING CORPORATION

  19. Existing Mortgages Will Reset Below Contract Rate Average Contract Mortgage Rate, 5yr Discounted Fixed - CANADA Reset Rate Range Year of Mortgage Reset Source: CMHC, FIRM

  20. Resale Market

  21. Ontario MLS® Sales CANADA MORTGAGE AND HOUSING CORPORATION

  22. Ontario vs. Huron Perth MLS® Sales CANADA MORTGAGE AND HOUSING CORPORATION

  23. Affordability Varies Across the Province Actual Income as % of Required Income to Purchase Resale Home - 2014 Source: CMHC Forecast , Statistics Canada, CREA

  24. Tighter Markets in Western Ontario Sales to New Listings Ratio, 2013 Source: CREA, CMHC

  25. Huron Perth A High-End Balanced Market Sales to New Listings Ratio Source: CMHC, CREA CANADA MORTGAGE AND HOUSING CORPORATION

  26. New Construction Market

  27. Ontario Housing Starts CANADA MORTGAGE AND HOUSING CORPORATION

  28. Stratford Housing Starts Starts CANADA MORTGAGE AND HOUSING CORPORATION

  29. Housing Starts, % Change 2012-2013 CANADA MORTGAGE AND HOUSING CORPORATION

  30. Single Detached Prices Continue to Increase in KCW CANADA MORTGAGE AND HOUSING CORPORATION

  31. High Number of Apartment Units Under Construction Apartment Units Under Construction - ONTARIO Source: CMHC

  32. Builders Started Fewer Apartment Projects in 2013 Source: CMHC

  33. Condo Investor Contributing to Supply % Estimate of Condominium Apartment Universe Held By Investors Source: CMHC Fall Rental Market Survey

  34. Conventional Rental Supply Falling Short of Demand Completions, Household Formation - ONTARIO Source: CMHC Forecast 2011-15, Statistics Canada

  35. Households and Housing Stock Indicators

  36. Ontario CMA Vacancy Rates, October 2013 CANADA MORTGAGE AND HOUSING CORPORATION

  37. 68% of Stratford Households Own CANADA MORTGAGE AND HOUSING CORPORATION

  38. 55% of Stratford Housing Stock are Single-Detached CANADA MORTGAGE AND HOUSING CORPORATION

  39. 80% of Stratford Housing Stock Built Prior to 1990 CANADA MORTGAGE AND HOUSING CORPORATION

  40. Stratford Household Income by Age CANADA MORTGAGE AND HOUSING CORPORATION

  41. RISKS TO THE HOUSING OUTLOOK DOWNSIDE RISKS • 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 CANADA MORTGAGE AND HOUSING CORPORATION

  42. 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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