CMHC ups 2011 housing starts view

Mon May 30, 2011 9:56am EDT
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TORONTO (Reuters) - Canada Mortgage and Housing Corp (CMHC) slightly raised its forecast for 2011 housing starts on Monday, citing an improving economy and still-low interest rates.

In a second-quarter housing outlook, the federal housing agency also forecast higher existing home sales than industry group Canadian Real Estate Association (CREA).

It said it expected housing starts to total 179,500 units this year, then climb to 185,300 units in 2012.

In February, CMHC had said it expected 2011 housing starts of 177,600, rising to 183,800 in 2012.

New Canadian government regulations are expected to take the heat off the housing market, once the main source of Canada's economic growth. The latest changes, aimed at mortgage amortization and refinancing, came into effect in the spring.

"We are expecting new and existing housing markets to fall in line with demographic fundamentals, as changes to mortgage rules take hold," said Bob Dugan, chief economist for CMHC.

Additionally, Canadian interest rates are expected to stay low for a little while longer despite Monday's data that showed Canadian growth accelerated to almost 4 percent in the first quarter. Second-quarter growth is expected to be around half of that.

The Bank of Canada will raise interest rates some time in the third quarter, in either July or September, a Reuters survey last week showed.

CMHC predicted existing home sales of 452,100 units this year, which would be 1.16 percent above the 2010 tally of 446,936 units. That is also slightly ahead of CREA, which sees 2011 sales dipping 1.3 percent to 441,100 units from 2010.   Continued...

<p>A high priced home sits for sale near St. Charles, Illinois September 24, 2009. REUTERS/John Gress</p>