ALTHOUGH we generally focus on the Winnipeg and Manitoba markets in this column, it is also important to look at the bigger picture, that being what is happening throughout Canada and in the United States.
Recently I had the opportunity to hear two economists, Peter Andersen and Peter Norman, give their prognostications of what to expect and why in the area of new housing. Following is a brief summation of what they had to say.
Andersen was full of optimism regarding the direction of the US economy.
Although he granted that is was going to take awhile, he felt that it was headed in the right direction. He saw job creation occurring and a four per cent growth rate in the economy.
Consumer confidence was increasing and the federal government was starting to back off in its propped up subsidy programs. Interest and mortgage rates were starting to increase, a sign that they were no longer being kept artificially low by the government.
Secondly, the average age of a personally owned auto in the U.S. is 10.6 years and there is a demand for replacement. Consumers are now upgrading and replacing their vehicles, a sure sign of consumer confidence. Credit is also picking up accordingly. Therefore, he sees no signs of a double-dip recession.
He does caution, however, that if commodities increase in price too fast, this may create an inflationary climate within the next three years.
Of course, whatever happens to the economy south of the border has tremendous impact on what happens north of the border, particularly in Ontario.
On a very strong positive note, 90 per cent of the job gains in Canada over the past year have been full time jobs. That shows that businesses are done with worrying about the effects of recessionary cutbacks and are willing to commit long term.
Specifically related to housing, Andersen calls for 180,000 starts in both 2011 and 2012, with only Alberta lagging a bit behind due to slow condo development. Toronto's high rise market has been remarkably strong with announcements such as a recent 75 storey condominium project.
He cautions that he feels the Canadian dollar is overvalued internationally and that there must be an inevitable slight increase in mortgage rates in the future, given that they have been so low for the past few years.
Norman is not as optimistic as Andersen but still forecasts a strong market. He acknowledges that the U.S. economy is rebounding but still fears that it is being propped up by public sector spending and a devalued dollar to stimulate trade.
The Canadian recovery, however, has been driven by households. In other words, consumer confidence and spending has been what has seen Canada through our economic recovery as opposed to some artificial stimulus.
Norman sees the resurgence of full time jobs after part time dominated the recession years. However, he is fearful that there has been no job growth among the youth segment.
He projects that interest rates will go up, but not in a punitive manner. He says that they will merely go back to where they were pre-recession. He calls for 175,000 starts and a continued healthy new housing market.
Both economists have tremendous faith in the Canadian economy, some confidence that the U.S. is rebounding and certainty in the new home and renovation markets in Canada. They merely arrive at their conclusions in different manners.
Mike Moore is president of the Manitoba Home Builders' Association.
