The housing market outlook for Canada is positive, according to the Canadian Home Builders’ Association (CHBA).
“Mortgage interest rates are not going up sharply anytime soon,” wrote Peter Andersen, the CHBA consulting economist in a two-page report. “And the next recession is unlikely until mid-decade at the earliest.”
Part of Andersen’s optimism is due to the U.S. recession ending. He notes that the National Bureau of Economic Research announced on Sept. 20 that the worst recession since the 1930s ended in June 2009.
While the U.S. is still recovering, Andersen writes that “over the past month, a number of economic indicators such as employment, capital goods orders, manufacturing activity and retail sales have calmed fears that the U.S. could again be sliding back into another recession.
“Private sector job growth, while lackluster, exceeded expectations in both June and July. The strong uptrend in capital goods orders points to a shift towards expansion plans and future hiring. Purchasing managers reported the highest level of manufacturing activity since May. August retail sales showed a second consecutive monthly increase.”
Andersen also sees Canada’s mortgage rates as “homebuyer friendly.”
“It is important to remember that mortgage rates are determined by the bond market and not by the Bank of Canada. Media headlines that higher interest rates are a problem for housing markets are off base,” writes Andersen. “Mortgage rates have been declining even though the Bank of Canada has raised its overnight interest rate target three times.”
The “special offer” one-year closed mortgage rate is currently only 2.9 per cent. The five-year rate is 3.99 per cent. The closed five-year variable rate is being quoted at 10 basis points under prime. It was 100 basis points over prime not that long ago, Andersen added.