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Housing Starts to Rise

House prices will increase this year and next despite the challenges posed by higher mortgage rates, Canada Mortgage and Housing Corp. said Wednesday.

An “improved balance between demand and supply” will stabilize prices through the rest of this year, it said in its second quarter Housing Market Outlook. Prices will “rise modestly” in 2011, it said.

The agency, which insures almost $500-million of Canadian mortgages, said the average cost for a home by the end of 2011 should be $350,000. That would be a gain of 1.4 per cent over April’s record high of $344,968.

Forecasting higher prices next year puts it at odds with both the Canadian Real Estate Association and Toronto-Dominion Bank, which are calling for prices to drop by 1.5 per cent and 2.7 per cent respectively in 2011.

“It all comes down to the economy and what we’ve seen so far this year is a strong end to 2009 and through 2010 we’ve seen some effects from various fiscal measures,” said senior economist Bill Clark. “There was a big April gain in employment, and as the economy gets moving again people become more interested in housing.”
Source: CMHC

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