Weather, easier down payments, low interest help feed 20% boost
Winnipeg Free Press
Tuesday March 9 2004
By Murray McNeill
WINNIPEG'S new-home market sprang back to life in February and industry experts predict it will continue to barrel along through the spring and early summer.
After posting a 35-per-cent decline in housing starts in January, Winnipeg's new-home market picked up where it left off in 2003 with a 20-per-cent jump in single and multiple-family starts in February, Canada Mortgage and Housing Corp. reported yesterday.
Dianne Himbeault, CMHC's senior market analyst for Manitoba, said a combination of factors helped breathe new life into the industry in February. They included warming temperatures, a continued strong demand for new homes and builders playing catch-up after a prolonged cold snap slowed construction activity in January.
Add to that two interest rates cuts so far this year and CMHC's recent waiving of the five-per-cent down-payment requirement for first-time homebuyers, and the new-home market should keep humming well into the summer, Himbeault predicted.
"I think it's going to continue to bring new people into the market and keep things affordable for them," she added.
The president of the Manitoba Home Builders Association said he's also looking forward to another busy spring and summer for local homebuilders. "We are obviously very optimistic about the way this is tracking," Wayne Bollman said in an interview yesterday.
He agreed that dropping the five-per-cent-down requirement will help spur the demand for homes in the coming months, but not as much as current low mortgage rates.
"The interest rates certainly are driving this thing. There's no question about it."
Laurie Boudreau, a mortgage broker and owner of the Centum Mortgage Solutions franchise in Winnipeg, agreed today's low mortgage rates are providing a big boost to the local housing market and said she expects the trend to continue for some time yet.
"I wouldn't be surprised if they stay low for another six months," Boudreau said in an interview. "I deal with 30 different lenders... and I haven't seen any indications they are going to go up."
An ongoing shortage of both resale homes and rental properties also is prompting more people to look at the new-home market, Bollman said. He added that he talked to one real estate agent during the weekend who told him she sold eight new houses last week in Winnipeg. "Many builders are taking orders now for starts in September and October," he noted, adding by summer they'll likely be taking orders for homes that won't even get under construction until next year.
CMHC noted the biggest gains last month were in the single-family segment of the new-home market, where starts were up almost 17 per cent from the same month in 2003 (118 compared to 101).
Most of the single-family gains were recorded within Winnipeg's city limits, where starts were up 24 per cent from a year earlier. In the surrounding bedroom communities, they were down 16 per cent, the federal agency added.
Multiple-family starts, meanwhile, continued to limp along, with only six recorded in Winnipeg and surrounding communities in February. While that was an improvement over the two that were posted in February, 2003, it still left multi-family starts running about 80 per cent behind last year's pace after the first two months of 2004, CMHC noted.
Himbeault said the decline is due to a lack of any major projects breaking ground so far in 2004. She blamed that in part on the fact there is an unusually high number (about 700) of multiple-family units under construction at the moment in Winnipeg.
She said usually there are no more than 100 to 300 units under construction at any given moment "so this (700) is quite high." As a result, developers may be having trouble finding enough qualified tradespeople, she said.
"We expect that as these are completed, crews can be shifted to new starts."
In addition to Winnipeg's 124, there were also 34 single- and multi-family starts recorded in Brandon last month, from seven in February of last year.
Nationally, starts also rebounded nicely in February, rising to 214,100 on a seasonally adjusted projected annual rate. That compared with 195,500 in January, CMHC said.