Housing boom losing steam

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Housing boom losing steam

9 z) i* S6 t$ p& g! J% Rhttp://www.canada.com/edmontonjo ... c440c36&k=48862

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Housing boom losing steam
% G  G+ D% E; S' mConference board predicts sector weakness over next two years
  
John Morrissy
+ m% u) u% d2 e5 F" f$ i, h1 u' @Canwest News Service

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$ R2 o7 d# [' }8 M. @0 bFriday, February 29, 2008
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OTTAWA - The Conference Board of Canada is warning of "a lengthy slowdown" in Canada's residential construction industry with profits, already off 22 per cent in 2007, falling for the next two years.

The longest housing boom in the post-war era is now "out of breath," following spectacular growth in the number of homes built and the prices paid for them, the board said in a report released Thursday.
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"Satiated pent-up demand and slower economic growth is leading to what is expected will be a long slowdown in the housing market," the report says.
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0 R! K1 X  H2 ]6 xAfter years of "relentless" house-price increases, declining affordability will be one of the primary factors weighing on the market, board economist Valerie Poulin said in an interview.

2 [+ e  N. T1 M3 F" uAs prices continue to edge upward by a forecast 5.3 per cent in 2008 -- far outstripping the 1.3-per-cent rate at which general consumer prices will rise -- affordability will be further eroded.

Demographics are playing a role as well, as baby boomers move past the "household formation" stage of their lives, when they leave home, rent or buy a home, and possibly form a family.
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  X4 U& _* X8 }" F. TYoung people today, conversely, are slowing down the process -- the main driver of residential construction -- as they remain in or return to their parental homes.
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Recent census information shows that more than 43 per cent of the four million young adults aged 20 to 29 lived with their parents in 2006, up from 32.1 per cent in 1986.
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- F  m( e+ e6 O2 X6 oThe effect will be more strongly felt in Central Canada, where the manufacturing sector is suffering at the hand of the high dollar and a U.S. economy falling into recession.

Housing markets in the West, particularly Saskatchewan, will be supported by continued strength in the mining, agriculture and energy sectors, Poulin said.

7 ?# s: N8 }. T1 m; \) b1 ~In 2007, profits in the industry fell by almost $1 billion in 2007 to $3.4 billion and will fall further to $3.3 billion in the year ahead, said Poulin.
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Rising costs of building materials will squeeze builders' margins in the years ahead, Poulin said, as softening demand will make it difficult to pass on those costs.

& d# T5 f3 ~$ h" \4 L' `, aWhile profitability will remain above historical averages, "profits will slowly decline, falling to $3.1 billion in 2009 before improving modestly in the outlying years of the forecast."

' B3 n& h- {" B1 GThe renovations industry, which constitutes 42 per cent of the residential construction business, will remain strong as a result of the buoyant resale market, with existing-home sales hitting 520,000 in 2007, Poulin said.
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3 `2 ^+ \( e7 f* Y" bHousing starts crested in the third quarter of 2007, with 247,000 units built.