Expect soft landing and rate increase: CMHC

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A decline in housing starts in 2014 is expected to cause a soft landing across Canada, according to the Canada Mortgage and Housing Corporation’s second quarter housing outlook, released Thursday.

"Fewer new home sales in 2012 and 2013 are translating to lower starts this year and next," Ed Heese, CMHC's Senior Market Analyst for the GTA says in an official statement. "Jobs, especially full-time work, and earnings will strengthen over the course of 2014, leading to stronger existing home sales. However, price growth will slow to a rate that more closely reflects income growth."

2014 is expected to see total housing starts level out to 181,100 units before ticking up slightly in 2015 to 182,100. The slight increase is expected to come as a result of increases in employment and disposable income.

“Builders are expected to continue to adjust activity, particularly with respect to multi-unit construction, in order to manage inventory levels,” CMHC’s report states.

Resales, meanwhile, are expected to reach 457,900 in 2014 before increasing to 471,100 in 2015.

As for mortgage rates, the crown corporation expects slight increases leading up to 2015. Though homebuyers will continue to enjoy lower-than-average rates.

“According to CMHC’s base case scenario for 2014, the average for the one-year posted mortgage rate is forecast to be within 3.0 per cent to 3.5 per cent, while the average for the five-year posted mortgage rate is anticipated to be within 5.0 per cent to 5.5 per cent,” the report states.

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