This is the most accurate and reliable report available to us in the area. It examines local, KW, Cambridge and Guelph economic trends and how these trends relate to housing and mortgage prices. I have summarized the main ideas of the report here, but a link can be found at the end of the article that contains the full material.
New Home Market
Housing starts in KW and Guelph will diverge in 2009. Specifically, housing starts will increase to 2,650 in 2006, a 4% increase from 2008. Guelph starts will shrink by 3% to 890 in 2009 from in 2008. For the area as a whole, rising house prices, a well supplied resale home market and uncertain economic conditions will combine to keep housing starts lower than levels seen in the first half of this decade.
Resale Home Market
The resale home market will continue to moderate in 2009. Sales of existing homes will lower by 6% to 6,100 units, down from 6,500 units in 2008. This said, the price of housing will continue to increase as will be expanded upon momentarily. The report states that “Rising house prices, uncertainty about the economy and the satiation of demand will dampen existing home sales in 2009”. Part of this is due to the mortgage options made available in 2006 that allowed first time home buyers to purchase homes earlier than they would have otherwise. This said, “the price advantage of resale over new, more selection, and continued population growth will combine to keep existing home sales at strong levels, but below record 2007 levels”. Upgrading to larger home will continue to be a trend throughout 2009. This is in part due to rising local incomes and sustained increases in home equity values. Specifically, the average price of existing homes will increase by 2% in 2009.
Economic Trends
Economic growth in KW-Guelph will be flat in 2009. In Kitchener Waterloo, employment will increase by less than 1%, while in Guelph it is forecasted to decrease by less than 1%. In either case, employment in the area will be much stronger than the Ontario average. “Over the next year, job growth will lead in the high tech sector, as well as in education, trade and construction sectors, in KW. These sectors are creating higher paying jobs. On the other hand, the manufacturing sector, and its largest sub sector, the auto industry, will continue to face challenges”. Overall, weekly earnings are expected to increase by 2% in both KW and Guelph in 2009. The growth in high tech, education and construction will be responsible for this increase.
Mortgage Rates Mortgage rates should remain within 25-50 basis points (.25%-.50%) of their current levels throughout the rest of the year. In the first half of 2009, rates should decrease slightly as the cost of credit to financial institutions eases. However, rising bond yields will force mortgage rates higher in the second half of 2009. For the rest of 2008 and throughout 2009, mortgage rates will remain at historical lows. The strong economic benefits of home ownership will sustain for the unforeseeable future.
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