Wednesday, May 16, 2007
What they don't tell you: part II
Yesterday we took a look at the CMHC forecast for housing starts over the next two years, Canada-wide. Today the TC has a local perspective titled: Construction boom shows signs of cooling. Remember that CMHC was calling for a 12% decrease equally spread over 2007-2008 from 2006 numbers.
In Victoria we see a 17% decline this year from last (2739 to 2285) and then a further 16% decline the following year from 2007 numbers (2285 to 1940). Wow. Did I say that? Wow.
Considering that everyone wants to be here--actually, from the real census data, everyone wants to be in Kelowna--that says that builders simply don't expect the boom to last.
Now this could be that they just don't make land anymore. Or it could be that the cities (Victoria and Langford) aren't willing to throw the height restriction bylaws out the window. Or most likely, it could really mean that this bumper crop of boomer buyers has a forecasted drought on the way, and fast.
Now you'd think, or you could be forgiven to think, that the RE market might be reflecting some of the same trends: apparently it's not, but according to CMHC it will.
Resales are forecast to go down: 4% this year and another 4% in 2008. Now if you're a shareholder in Re/Max, wouldn't you be a bit concerned about an 8% drop in sales? What's more, if you're a homeowner banking on double digit value gains to finance your renos or your move up to bigger and better property dreams, the drop in appreciation (forecast for 8% this year and 4% next year) should concern you be a bit too. I won't even mention forecasted interest rate rises.
I'm thinking if I just bought, I came late to the party. You know that part of the party where all there is are crumbs on the platters, no ice in the freezer and flat Coke to mix your swill with. If I'm not yet drunk (which I must have been to buy today) I'm likely the next to leave.
I wonder how good CMHC and VREB are at forecasting? Are they like governments who have a habit of underestimating things so they can "outperform" themselves on the upside and quash the fear on the down?