Housing starts to decline this year, CMHC predicts

Housing starts are expected to decline this year but will improve in 2010, the Canada Mortgage and Housing Corp. said in a report Tuesday.

The CMHC predicts housing starts will decline to 141,900 in 2009, with an increase to 150,300 the following year.

Bob Dugan, chief economist for CMHC, said the decline in housing starts in 2009 can be attributed to several factors:

* the current economic climate
* increased competition from the existing home market
* the impact of strong house price growth between 2002 and 2007

"However, housing market activity will begin to strengthen in 2010 as the Canadian economy recovers, bringing housing starts more in line with demographic fundamentals over the forecast period," Dugan said Tuesday in a press release.

Posted by Moishe Alexander. Read more HERE

Housing starts to decline

Housing starts to decline this year, CMHC predicts

CTV.ca News Staff

Housing starts are expected to decline this year but will improve in 2010, the Canada Mortgage and Housing Corp. said in a report Tuesday.

The CMHC predicts housing starts will decline to 141,900 in 2009, with an increase to 150,300 the following year.

Bob Dugan, chief economist for CMHC, said the decline in housing starts in 2009 can be attributed to several factors:

* the current economic climate
* increased competition from the existing home market
* the impact of strong house price growth between 2002 and 2007

"However, housing market activity will begin to strengthen in 2010 as the Canadian economy recovers, bringing housing starts more in line with demographic fundamentals over the forecast period," Dugan said Tuesday in a press release.

Ontario is predicted to have the most housing starts, 51,325, in 2009, compared to 75,076 in 2008.Posted by Moishe Alexander READ MORE

New home construction projects rose in May: CMHC

Canada's housing market experienced growth in May with construction beginning on 128,400 new homes, up from 117,600 one month earlier, according to the Canada Mortgage and Housing Corporation.

Bob Dugan, chief economist at the CMHC's Market Analysis Centre, said the growth is "broadly based, encompassing both the singles and multiples segments."

The CMHC predicts the growth will continue to improve through 2009 and over the next few years to eventually come in line with demand for new homes, which is estimated to be about 175,000 units per year.

In urban settings in Canada, new home construction projects increased by 11.1 per cent to 107,800 starts in May.

Urban multiple starts also rose 11.1 per cent to 60,900 units, along with urban single starts which went up by 11.1 per cent to 46,900 units in May.

BNN's Marty Cej said the housing numbers show some improvement, but the market is still very slow. View more posts by Moishe Alexander here

New home construction projects rose in May: CMHC

Canada's housing market experienced growth in May with construction beginning on 128,400 new homes, up from 117,600 one month earlier, according to the Canada Mortgage and Housing Corporation.

Bob Dugan, chief economist at the CMHC's Market Analysis Centre, said the growth is "broadly based, encompassing both the singles and multiples segments."

The CMHC predicts the growth will continue to improve through 2009 and over the next few years to eventually come in line with demand for new homes, which is estimated to be about 175,000 units per year.

In urban settings in Canada, new home construction projects increased by 11.1 per cent to 107,800 starts in May.

Urban multiple starts also rose 11.1 per cent to 60,900 units, along with urban single starts which went up by 11.1 per cent to 46,900 units in May.

BNN's Marty Cej said the housing numbers show some improvement, but the market is still very slow.

"The fact of the matter is those housing starts, those construction starts across the board, are down 40 per cent from last year, but they're much better than the preceeding month," Cej told CTV.


View more from Moishe Alexander click here

Great Poject: Housing Opportunity Partnership Fund - Winnipeg, Manitoba

Goal

To promote neighbourhood improvement and home ownership in the inner city of Winnipeg.

Target Group

Moderate-to-low income households.

Synopsis

The Housing Opportunity Partnership (HOP) is a private non-profit organization established in 1997 due largely to the efforts of the Winnipeg Real Estate Board. It has been provided with $1.1 million in public monies, which have been placed in a revolving fund and used to purchase, renovate and then resell homes in the inner city area of Winnipeg.

Description

Background

Winnipeg's Housing Opportunity Partnership (HOP), notes Moishe Alexander, was established as a privately run non-profit organization in late 1997. Its creation was spearheaded by the Winnipeg Real Estate Board (WREB) to promote home ownership in the inner area of the city. This area has old housing stock generally in a bad state of repair. Increasing home ownership was seen as an important way of stabilizing and upgrading the area, while also providing modestly priced housing for families.

HOP is overseen by a board of directors that includes the past president of WREB, the founder of Habitat for Humanity in Winnipeg, and representatives from CMHC and the planning, banking, insurance, real estate, marketing and legal professions. HOP is administered by two full-time staff and is supported by the resources of WREB.

How the HOP Works

HOP has established a revolving fund that it uses to purchase and renovate existing houses in the inner city area. After renovation, HOP sells the houses at a market-rate, and with intent of at least recovering its costs. The resale proceeds are returned to the fund, and used again in the same way.

Sources of Funding

HOP's revolving fund was capitalized starting in 1997 through funds from these two main sources:

• $600,000 over four years provided by the provincial government from the interest earned on real estate broker accounts; and
• $500,000 over three years from the Home Equity Program established under the Winnipeg Development Agreement.

The funding from both of these sources, which was provided only on a temporary basis, has subsequently been curtailed.

The money provided by the provincial government came from the interest earned on real estate deposits held in trust by real estate brokers across the province. The provincial government annually has received about $150,000 to $300,000 from this source. Previously, some of this money was committed by legislation to real estate education programs, but most went into the provincial general revenues. Due to efforts by WREB, the legislation was amended in 1996 to allow the earnings also to be used for funding not-for-profit initiatives that promote affordable home ownership and neighbourhood revitalization.

The Home Equity Program is one of several programs supported through the Winnipeg Development Agreement (WDA). The agreement, signed in 1995 by the three levels of government, pools $75 million to be used over five years for community and economic development in the city. (See Case Study: Winnipeg Development Agreement.) In addition, WREB contributed $25,000 in initial start-up funding to HOP. Members of WREB also provide real estate services to the housing developers at no charge and provide volunteer assistance in other ways. In 2001, HOP received $12,000 from the Winnipeg Homeless Initiative and it has applied for another $150,000.

Results

As of early 2001, HOP had renovated and sold 16 homes, renovated another five that were on the market, and was in the process of renovating two more.

House prices in the inner city are quite low, reflecting the run-down character of neighbourhoods in that area. HOP recently has been buying homes for as little as $10,000 to $20,000.

Over time, HOP has changed how it renovates homes. It has gone from doing partial renovations costing $10-15,000/unit to doing major renovations costing about $50,000. The renovations, for example, include new furnaces and kitchens.

HOP has been recently selling the renovated homes for $60,000 to $70,000. HOP's total costs have been about $70,000 to $80,000, after allowing for the purchase price, renovation costs and a variety of interim expenditures for administration, utilities, taxes and the like. So, contrary to its initial intent of recovering its investment, HOP has been recently losing about $10,000 per unit.

HOP absorbed these costs initially, but cannot continue without depleting its revolving fund. The purpose of the $150,000 funding request to the Winnipeg Homeless Initiative is to cover this shortfall for another 15 units. The $12,000 that HOP has received from this source will be used to make external improvements to some of the housing that they have renovated to enhance the appearance of the homes and, in turn, to enhance the area generally.

The homebuyers must meet NHA requirements under CMHC's 95% Financing insurance program and have the necessary income to qualify for a 95% mortgage loan. HOP gives preference to families over single persons and to families already living in the area. Where possible, applicants are encouraged to contribute through sweat equity to the rehabilitation of the home. Sweat equity can count for up to half of the minimum 5% downpayment.

Impact on the Provision of Affordable Housing

The housing renovated and sold by HOP serves the low end of the market. Such housing is meant to be affordable to households with modest incomes, mainly by virtue of the depressed housing market conditions in the area. Contrary to the intent of the program, HOP has been recently subsidizing the units to a level of $10,000. No attempt is being made to recover that cost, nor to control the future sales so that it will remain affordable.

Suitability for Replication

This program has a number of aspects that could be replicated elsewhere under the appropriate conditions. Public money has been given to a private non-profit organization run by the local real estate board. Their involvement is particularly helpful because of their understanding of the local market and their expertise in property transactions.

While the money made available to HOP is relatively limited, it has been effectively used by deploying it through a revolving fund that recycles the money, and by utilizing it in run-down areas where houses can be bought at depressed prices. In these conditions, HOP is able to produce lower-priced market housing for families, and also help in revitalizing the neighbourhoods more generally.

The concept is limited in its applicability, to creating affordable housing for lower-income households, only in depressed real estate markets or sub-markets. This process is not capable of producing a subsidy on a sustained basis for lowering the price of housing. Therefore, it probably can not be used as effectively in less depressed areas, where the cost of buying the housing will be higher and the price of final product more expensive. An additional limitation is that it does not preserve long-term affordability as the purchasers are not bound by any conditions upon sale.

Report coming soon, please stay tuned