CMHC Updates Forecast for Home Builders
Not that you really needed to spend too much time with an update to builders as many of them already knew in November when CMHC released their annual forecast that their numbers were to aggressive.
In November they told us that the starts for 2009 would be 4500, last week they said it will now be 3800. Even at this number most builders think they are still off. Reviewing a recent survey of builders opinion from the Calgary Region Home Builders Association called for starts at 3300.
Either way it will continue to be a tough year for builders, which means it will continue to be a great year for people wanting to buy a new home. Margins will be tight.
Some people ask me how is this slowdown in the construction industry really hurting the builders? Consider this. Let’s say the average sale of a New home is $550,000. In the height of the boom builders were making around a 25-35% profit margin. Let’s say 30% which means they would have made say $165,000. In “normal times the margin should be around 18% or $99,000. Today most builders are lucky if they are making 13% but it is more like 8-12%. At 10% they make $55,000. That is almost a 200% drop since the boom, and an 80% drop in profits per house built compared to “normal” times.
Do we really need to say anymore…now is a great time to buy a new home.
