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Economic & Real Estate OutlookEconomic & Real Estate Outlook
IMBA CONFERENCE –April 2011
TED TSIAKOPOULOSRegional Economist – CMHCttsiakop@cmhc.ca
Housing market intelligence you can count on
AGENDA
• K I i ht f 2011/12• Key Insights for 2011/12• Housing Outlook: Sales & Prices• Factors Shaping Housing Outlook• Risks to the Outlook• Summary• Q & As
CANADA MORTGAGE AND HOUSING CORPORATION
Key Insights for 2011/12
• Canadian/Ontario housing market stabilizing• Southern Ontario to lag activity in Northern Ontario &
Western Canadian markets• P i t b l l t t f th• Prices to grow below long term rate of growth• No evidence of housing price bubble• Inflation and interest rates will riseInflation and interest rates will rise• First time buyers sensitive to interest rates, demographics• Outlook still subject to uncertainty/riskj y
CANADA MORTGAGE AND HOUSING CORPORATION
Canadian Sales Stabilize But Less Impetus For Growth in 2011
Existing home sales, saar - CANADA600000
400000
450000
500000
550000
250000
300000
350000
400000
150000
200000
250000
2Q1
2Q3
3Q1
3Q3
4Q1
4Q3
5Q1
5Q3
6Q1
6Q3
7Q1
7Q3
8Q1
8Q3
9Q1
9Q3
0Q1
0Q3
1(F)
3(F)
2002
2002
2003
2003
2004
2004
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
Q1
2011
Q3
CANADA MORTGAGE AND HOUSING CORPORATION
Source: CREA, CMHC forecast
But Sales Grow Faster in the West in 2011
CANADA-1.1%
-21%
0.5%5 9%
2.0%8.5%
-5.9%
Source: CMHC MLS Forecast, CREA
Northern Ontario Leads Housing Market Activity in 2011
2 0%
3.0%existing home sales, %chg - Ontario
0.0%
1.0%
2.0%
-2.0%
-1.0%
5 0%
-4.0%
-3.0%
-6.0%
-5.0%
Northern Ontario Eastern Ontario Southern Ontario Western Ontario
CANADA MORTGAGE AND HOUSING CORPORATION
Source: CMHC MLS Forecast, CREA
Canadian Housing Prices Stabilize
600000
Existing home price, s.a - Canada
400000450000500000550000600000
250000300000350000400000
150000200000
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
(F)
3(F)
S CREA CMHC f t
2002
Q20
02Q
2003
Q20
03Q
2004
Q20
04Q
2005
Q20
05Q
2006
Q20
06Q
2007
Q20
07Q
2008
Q20
08Q
2009
Q20
09Q
2010
Q20
10Q
2011
Q1
2011
Q3
CANADA MORTGAGE AND HOUSING CORPORATION
Source: CREA, CMHC forecast
Are Real Estate Markets Defying Logic?
M aybeM aybe
• House Price to Income Ratios Are High• Household Debt to Income Ratios Are High
CANADA MORTGAGE AND HOUSING CORPORATION
Source: Statistics Canada, Bank of Canada, CMHC
Deeper Analysis Suggests No Housing Bubble Exists
103
Actual Resale Price vs Fundamental Price Ratio - ONTARIO
101
102
103
99
100
97
98
96
2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4
Actual vs Fundamental Price Ratio Fair Market Value
CANADA MORTGAGE AND HOUSING CORPORATION
Source: CREA, CMHC model estimates
Actual vs Fundamental Price Ratio Fair Market Value
The Big Picture & Why it Matters
Why is housing momentum set to slow?Why is housing momentum set to slow?
CANADA MORTGAGE AND HOUSING CORPORATION
DRIVERS OF MORTGAGE BROKER BUSINESS
ECONOMY (SHORT RUN)(SHORT RUN)
MORTGAGE BROKER
CREDIT CONDITIONS (SHORT RUN)
HOUSING MARKETS &
POLICY(SHORT & LONG
) BUSINESS (SHORT RUN) RUN)
DEMOGRAPHICS(LONG RUN)
CANADA MORTGAGE AND HOUSING CORPORATION
2010 GDP Growth – Ontario Among Leaders
6 Real GDP % - 2010f
4
5
3
1
2
0
BC ALTA SAS MAN ONT QUE NFLD CAN
CANADA MORTGAGE AND HOUSING CORPORATION
Source: Statistics Canada, CMHC forecast (f)
Migratory Inflows from Rest of Canada Improve in 2010
10,000Net provincial migratory inflows to Ontario
5,000
7,500
0
2,500
-5,000
-2,500
10 000
-7,500
,
CANADA MORTGAGE AND HOUSING CORPORATION
-10,00000 01 02 03 04 05 06 07 08 09 10
Source: Statistics Canada
…As Does Ontario`s Share of International Migration
75%
85% Ontario as share % of Canada immigration
65%
75%
Long Term Avg
45%
55%
25%
35%
2000
Q1
2000
Q3
2001
Q1
2001
Q3
2002
Q1
2002
Q3
2003
Q1
2003
Q3
2004
Q1
2004
Q3
2005
Q1
2005
Q3
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
CANADA MORTGAGE AND HOUSING CORPORATION
Source: Statistics Canada
But Canada's Economic Story Changing
MANUFACTURING INVESTMENTS
2009/10 story
ENERGY/NON ENERGY INVESTMENTS
2011/12 t
ENERGY/NON ENERGY INVESTMENTS
2011/12 story
CANADA MORTGAGE AND HOUSING CORPORATION
Resource Poor Emerging Economies Growing
Real GDP % chg
10
4
6
8
-2
0
2
-6
-4
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
2000
Q20
00Q
2001
Q20
01Q
2002
Q20
02Q
2003
Q20
03Q
2004
Q20
04Q
2005
Q20
05Q
2006
Q20
06Q
2007
Q20
07Q
2008
Q20
08Q
2009
Q20
09Q
2010
Q20
10Q
2011
Q20
11Q
World Advanced economies Emerging economies
CANADA MORTGAGE AND HOUSING CORPORATION
Source: IMF
g g
Western Canada Tapping Into Emerging Markets
% share of exports to emerging markets
25
20
25
10
15
0
5
Source: Industry Canada
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Western Canada Ontario
CANADA MORTGAGE AND HOUSING CORPORATION
Source: Industry CanadaSource: Industry Canada
But US Economy Improving
4%
6% US GDP Growth - Annualized
0%
2%
4%
‐4%
‐2%
‐8%
‐6%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
S US B f E i A t
2008Q
2008Q
2008Q
2008Q
2009Q
2009Q
2009Q
2009Q
2010Q
2010Q
2010Q
2010Q
CANADA MORTGAGE AND HOUSING CORPORATION
Source: US Bureau of Economic Accounts
Business Spending Will Lead During Expansion Phase
5
6 Quarterly real growth (2002$) - ONTARIO
3
4
5
0
1
2
‐3
‐2
‐1
09q3 09q4 10q1 10q2 10q3
Consumption Growth % Business Spending Growth %
CANADA MORTGAGE AND HOUSING CORPORATION
Source: Provincial Economic Accounts
Credit Growth is Slowing in Canada
Credit Growth, annualized - Canada
12%
8%
10%
4%
6%
0%
2%
CANADA MORTGAGE AND HOUSING CORPORATION
Source: Statistics Canada
Canadian Households Will Pay Down Some Debt
600,000$
400,000
500,000
Household Assets
300,000
100,000
200,000
Household Debt
0
1990
Q1
1991
Q1
1992
Q1
1993
Q1
1994
Q1
1995
Q1
1996
Q1
1997
Q1
1998
Q1
1999
Q1
2000
Q1
2001
Q1
2002
Q1
2003
Q1
2004
Q1
2005
Q1
2006
Q1
2007
Q1
2008
Q1
2009
Q1
2010
Q1
Sources: Statistics Canada, National Income and Expenditure Accounts, National Balance Sheet Accounts.
6
First Time Buyers Sensitive to the Interest Rate Story
8 4
8.85 yr posted mtg rate %
7.6
8.0
8.4
6.8
7.2
6.0
6.4
5.2
5.6
00 01 02 03 04 05 06 07 08 09 10 11 12
CANADA MORTGAGE AND HOUSING CORPORATION
Source: CMHC Forecast, Bank of Canada, Statistics Canada
First Time Buyers Sensitive to the Demographic Story
4000000Ontario Population
2500000
3000000
3500000
1500000
2000000
2500000 Age 25-44
Age 45-64
Age 15-24
500000
1000000
500000Age 65-99
0
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
CANADA MORTGAGE AND HOUSING CORPORATION
Source: Statistics Canada, CMHC
FORECAST
Ontario Region Economic Outlook Preliminary Estimates First Quarter - 2011
*Preliminary Estimates, First Quarter 2011
ECONOMY 2010e 2011f % chg 2012f % chgGDP 3.0 2.2 2.8GDP 3.0 2.2 2.8Employment % chg. 1.8 1.3 1.5Labour Force % chg. 1.5 0.8 1.3Unemployment Rate 8.7 8.2 8.0p yAverage Weekly Earnings 1.8 2.0 2.5
MIGRATION
%chg
Net Migration 102973 114100 10.8% 121200 6.2%Net International 111688 120000 7.4% 127500 6.3%Net Interprovincial -3200 -5900 84.4% -6300 6.8%
CANADA MORTGAGE AND HOUSING CORPORATION
Source: Statistics Canada, CMHC Forecast *The outlook is subject to a heightened degree of uncertainty. Although point forecasts are presented in this publication, CMHC also presents forecast ranges and risks where appropriate. The forecastsincluded in this document are based on information available as of January 17, 2011.
Economic & Housing Summary
Ontario Housing Momentum Slows Through 2011 Growth in Housing Resumes in 2012 : Economy &
Migration Offset Rate Hikes Emerging Economies Leading Global Growth Energy & Industrial Goods Sector Leads Western Canada & Northern Ontario Will Outperform Signs US Economic Recovery Sustainable Inflation Expectations and Interest Rates on the Rise
CANADA MORTGAGE AND HOUSING CORPORATION
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