U.S. home prices rose 10.5 per cent over past year

By The Associated Press - Tuesday, May 7, 2013 at 9:08 AM - 0 Comments

WASHINGTON – A survey shows U.S. home prices rose 10.5 per cent in March compared with a year ago, the biggest gain since March 2006.

Core Logic, a real estate data provider, said annual home prices have now increased for 13 straight months. Prices are rising in part because more buyers are bidding on a limited supply of homes for sale.

Prices increased in 46 states over the past year — 11 of them posting double-digit gains. And when excluding distressed sales, prices rose in every state.

Nevada led all states with a 22.2 per cent annual gain. It was followed by California (17.2 per cent), Arizona (16.8 per cent), Idaho (14.5 per cent) and Oregon (14.3 per cent).

Home prices also rose 1.9 per cent in March from February, signalling a solid start to the spring buying season.

A very Canadian housing slump

By Stephen Gordon - Monday, April 15, 2013 at 1:26 PM - 0 Comments

Data from the housing market out today shows that sales were down 15.3 per cent in March compared to the same period last year. Given the events of the past decade, it is natural to worry about the possibility that Canada is headed for a U.S.-style housing meltdown. But I don’t see how that’s likely to happen. It’s far more probable that we’ll see the kind of housing slump we usually see in Canada: a long grind.

The reasons for thinking so are two-fold. The first is that Canadian mortgage underwriting standards are more conservative than they were in the U.S. Practices such as “liar loans” (where borrowers didn’t have to provide proof that they earned as much as they said they did), no-money-down mortgages or negative amortization (where payments didn’t even cover the interest on the loan) never crossed the border into Canada. To be sure, we weren’t entirely immune from the trend towards looser mortgage loan standards — the introduction of longer amortization periods of 30, 35 and even 40 years may have been followed by other “innovations” if the U.S. housing market hadn’t melted down when it did.

The other, related point is that Canadians simply don’t default on their mortgages the way Americans do. This chart graphs the percentage of mortgages in arrears by 90 days or more (Alberta is broken out for reasons that will become obvious in a minute):

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Another way Americans get better deals: cheap, flexible, 30-year mortgages

By Chris Sorensen - Saturday, March 30, 2013 at 8:00 PM - 0 Comments

Photo illustration by Taylor Shute

Finance Minister Jim Flaherty has been scolding mortgage lenders who offer their customers five-year fixed rates below three per cent, lest they spark a flurry of home buying and further inflate Canada’s housing bubble. Meanwhile, south of the border, where the housing market is just beginning to claw its way back from its 2007 implosion, banks are wooing nervous consumers with rates that are just a touch higher—at 3.63 per cent—but can be locked in for 30 years. Not only is that a far better deal than Canada’s current 10-year fixed rates of 3.69 per cent, the maximum term most lenders will offer, but it’s a great way to guard against an inevitable rise in interest rates down the road.

On the surface, it seems like another case of Canadians getting a worse deal than their American counterparts—not unlike when they buy a hardcover book or a new car. Across the board, mortgages are now cheaper in the U.S., where interest rates are currently lower and competition much greater in general. The 30-year mortgages are also not, technically, fixed-rate, because they can easily be refinanced by borrowers who want to take advantage of lower rates. “The person borrowing can get out at any time by switching to another lender, or just by paying it off,” says Nicholas Rowe, an associate professor of economics at Ottawa’s Carleton University. “The rates can’t go up, but they might go down if you find a better deal.”

While a great deal for borrowers, Rowe cautions the U.S.-style 30-year mortgage still comes at a price. Since lenders face an increased risk if rates fall, they need to compensate by charging slightly higher interest rates. (In contrast, the most popular Canadian mortgages are “closed,” meaning they can’t be refinanced or paid off early without incurring a penalty, and are for significantly shorter terms—usually five years.) Patrick Lawler, the chief economist of the U.S. Federal Housing Finance Agency, said in a panel discussion two years ago that U.S. borrowers pay at least an extra 0.25 to 0.5 percentage point in rates in exchange for the option to prepay without penalty and sometimes “another percentage point or two” to have a long-term fixed rate, according to a report in the Wall Street Journal. Nevertheless, as many as 80 per cent of borrowers in America opt for 30-year mortgages, which are backed by housing finance giants Fannie Mae and Freddie Mac (another reason why U.S. rates are cheaper despite heightened risk).

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The housing market has entered the twilight zone

By Colin Campbell - Friday, March 29, 2013 at 11:54 AM - 0 Comments

Getty Images

In Ottawa, the leader of the NDP—the NDP—accused the Conservative finance minister, Jim Flaherty, of “banana republic behaviour” for his efforts to intervene in the economy and influence mortgage rates.

Meanwhile, Flaherty’s one-time ally in his anti-debt fight, Bank of Canada governor Mark Carney, has declared the household debt problem solved— apparently, a debt-to-GDP ratio of 165 per cent is no longer anything to worry about.

In Vancouver, a former prime minister, Kim Campbell, made headlines this month for filing a lawsuit in which she’s trying to get out of a 2007 condo purchase and recoup a $368,000 deposit. The Canadian housing market, it seems, has entered the twilight zone.

It’s getting harder and harder to tell what’s sensical and what’s nonsensical. Even the Tory cabinet can’t seem to agree if it should be concerned about Canadians taking on big mortgages at discount rates, with the Tories’ Small Business Minister Maxime Bernier joining Thomas Mulcair in his criticism of Flaherty.

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And those ugly housing market numbers are out

By Erica Alini - Friday, March 15, 2013 at 11:25 AM - 0 Comments

To recap:

• Sales of existing homes tumbled 15.8 per cent in February compared to the same month last year, the Canadian Real Estate Association said today.
• The national average sales price edged down one per cent from year-ago levels.
• On a monthly basis, sales slipped  2.1 per cent from January, the eleventh month of declines since the market started cooling in April 2012.
• As much as 80 per cent of local markets saw lower sales activity in February 2013 than in February 2012.
• Nationally, prices held up: single-family homes gained 4.2 per cent in annual terms, townhouses climbed 2.4 per cent and condos edged up 0.8 per cent.
• Vancouver saw the largest declines in both sales (-29.4 per cent on annual basis) and prices (-5.6 per cent on an annual basis).
• Despite a drop in sales, Toronto and Montreal saw home prices gain a modest 1.6 per cent from year-ago levels. That compares to average price gains of nearly seven per cent in 2012, according to TD Bank.
• Edmonton bucked the trend with homes sales and prices up 18.2 per cent and 4.3 per cent respectively from January.
• The ratio of home sales to homes newly up for sale held steady around 50 per cent in February, as both sales and new listings declined.
• The MLS Home Price Index, which adjusts for the quality of homes sold, rose 2.7 per cent on an annual basis, the smallest gain since March 2011.

What the analysts say:

• TD’s Diana Petramala attributes much of the current weakness to tighter mortgage rules introduced in July 2012, which, she calculates, had the equivalent impact of a one per cent hike in interest rates. The effect of changes to mortgage insurance rules, though, tends to wear off after about nine months, she notes. After the February slide, sale activity is now down to levels supported by employment and population growth, meaning the market might have hit bottom. Prices, which adjust with a lag, will likely continue to weaken.
• Vancouver is now a buyers’ market, writes BMO’s Robert Kavcic. Weakness in B.C., though, masks softer adjustments and even gains elsewhere after July’s round of rules-tightening.

Brace for grim housing market news

By Erica Alini - Wednesday, March 13, 2013 at 3:06 PM - 0 Comments

January home sales data had us all wonder whether the downward trip the housing market had embarked on in mid-2012 was already over. After four consecutive months of declines home resales rebounded in the first month of the year from December. Had we already hit bottom?

We hadn’t. February home sales numbers, due out on Friday, will almost certainly show that housing has resumed its southbound trajectory — and at a faster pace this time.

Source: Canadian Real Estate Association

Though figures published by the Canadian Real Estate Association will give us a more refined and complete picture, we can already tell from numbers posted by the major local real estate boards that it isn’t going to be pretty.

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Return of the housing bubble

By Tamsin McMahon - Monday, March 4, 2013 at 7:00 AM - 0 Comments

Lucy Nicholson/Reuters

For the past decade American economists Karl Case and Robert Shiller, whose Case-Shiller indices are considered the official barometer of the U.S. housing sector, have regularly polled recent home buyers on where they think house prices are headed. The 5,000 buyers in their survey have proved remarkably perceptive, consistently predicting how far prices would rise or fall a year into the future.

But when they asked buyers where they thought prices would be in a decade, a different picture emerged. Buyers have regularly predicted large and steady long-term increases in home prices. Even in 2009, during the depths of the financial crisis as prices fell more than 30 per cent, buyers were still predicting their homes would likely double in value over the next 10 years.

With this enduring faith in the infallibility of house prices, America’s housing market suddenly seems to be springing to life once more. Nationally, prices jumped more than 12 per cent in January over the previous year, the largest increase since 2006. Prices are up in more than 100 cities, according to real estate data firm Zillow, with increases above 10 per cent in more than 47 major centres.

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Fourth-quarter GDP growth was bad: here’s why

By Erica Alini - Wednesday, February 27, 2013 at 7:14 PM - 0 Comments

Update: As expected, GDP growth in the last quarter of 2012 was a dismal 0.6 per cent annualized, and the economy shrank 0.2 per cent in December. Despite that, Finance Minister Jim Flaherty said today the government might further trim spending in the next budget, as lower-than-expected growth impacts revenue flows the bean counters were banking on. NDP House leader Nathan Cullen called the finance minister’s concern over balance budgets at a time of withering growth “a manufactured crisis.”

Here we explain why the economy stalled in late 2012 and why it might take some time for it to pick up speed again.

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Canada’s fourth-quarter GDP figures, out on Friday, are expected to show the clearest picture yet of the shift the economy has been undergoing for the per past year or so. For the first time in nearly seven years, monthly GDP numbers have already revealed, Canada underperformed the U.S. in 2012.

In January, the Bank of Canada forecast Octoober-to-December growth would come in at one per cent, but Governor Mark Carney hinted this week he expects the actual number to be lower.

Why the slowdown? Largely, because consumer spending and the housing market, which propelled Canada out of the recession as the rest of the global economy dwindled, are losing steam. And now that the economy can’t run on internal combustion alone anymore, it’s not clear how much of lift it’s going to get from the outside.

Here’s what happened over the past decade:

Source: Statistics Canada - Canada Yearbook 2012, Chapter 9: Economic Accounts.

Exports, Canada’s traditional engine of growth, have been shrinking as a share of the economy: down to around 30 per cent of non-inflation adjusted GDP from a record 46 per cent in 2000. As the chart shows, the 2008-2009 crisis delivered a considerable blow to Canadian exports, which fell faster than GDP and haven’t come close to recovering. But the decline started long before global demand seized up in the wake of Lehman Brothers etc. The long-term trend reflects a loss of competitiveness and failure to diversify away from the U.S. and toward Asian economies, as the Bank of Canada has long been saying.

Consumer spending, by contrast, expanded as a share of the economy during the recession, limiting the magnitude of the contraction and picking up the slack from declining net trade:

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Is the housing cool-down already over?

By Erica Alini - Friday, February 15, 2013 at 10:44 AM - 0 Comments

Nathan Denette/The Canadian Press

To recap:

• Sales of existing homes edged up 1.3 per cent in January from December, the first monthly gain since September 2012, the Canadian Real Estate Association said today.
• Compared to January 2012, non seasonally adjusted sales were down 5.2 per cent.
• Sales activity rose 5.6 per cent from December in Greater Toronto, 4.7 per cent in Greater Vancouver and 10 per cent in Edmonton. Overall, though, monthly sales activity declines in about half of all local markets.
• In year-over-year terms, sales were down four per cent in Toronto and as much as 13 per cent in Vancouver. In general, two thirds of local markets registered lower activity compared to January 2012, with Calgary, Edmonton, Winnipeg and few others, bucking the trend.
• The average price for homes sold last months was $354,754, up two per cent from the same period in 2012.
• On average, the time lag between a new listing and a home sale was 6.6 months in January, virtually unchanged from December.
• Sales of single-family homes and town houses registered gains, whereas condos held roughly steady.
• The MLS Home Price Index, which adjusts for different types of properties sold, rose 3.3 per cent in January on a year-over-year basis. It was the smallest gain since April 2011.

What the analysts are saying:

• The January reading suggests that the housing market may be stabilizing after the cool-down witnessed since tighter mortgage rules took effect in July 2012, writes TD’s Derek Burleton. According to the bank’s research, the impact of new mortgage insurance rules tends to wear out after six to nine months. Burleton expects this to be the case for the latest round of tightening as well, especially since a relatively healthy labour market and interest rates at historic lows should encourage home-buying.
• In a report published yesterday, before today’s release by CREA, the International Monetary Fund warned that Canadian residential real estate prices are 10 per cent overvalued. The Fund also indicated that household debt to disposable income and real estate investment as a share of GDP have reached an all time high in 2012. Though the report predicted a housing correction, it said Canada is unlikely to experience “a house boom-and-bust a la United States.”

Toronto realtors get it wrong

By Chris Sorensen - Thursday, January 24, 2013 at 4:20 PM - 0 Comments

Everyone is watching Canada’s sputtering housing market these days. Is it the beginning of a crash, or a much-hoped-for soft landing? Every piece of new data is thrust under the microscope. But if you happen to live in Canada’s largest city, you should view the monthly sales figures served up by the Toronto Real Estate Board with an extra-critical eye.

Last week, the board issued a hopeful-sounding press release. After several months of falling sales—down 20 per cent in December—it said the first two weeks of January suggested a mood shift. Sales were up 2.4 per cent to 1,469, compared to the 1,435 reported a year earlier. Prices were up, too—by four per cent, to an average of $459,728 across the Greater Toronto Area, or GTA. “The new year started off on a positive note with residential sales slightly above last year’s levels,” Toronto Real Estate Board president Ann Hannah said in a statement. “I am cautiously optimistic about this result.” Continue…

Down goes the housing market

By Erica Alini - Tuesday, January 15, 2013 at 10:13 AM - 0 Comments

Nathan Denette/The Canadian Press

To recap:

• Sales of existing homes in Canada dipped 0.5 per cent nationally in December from November in seasonally adjusted terms, the Canadian Real Estate Association said today. It was the the third consecutive month of declines.
• Actual, non-seasonally adjusted sales, dropped 17.4 per cent compared to December 2011.
• CREA’s MLS home-price index rose 3.3 per cent on a year-over-year basis, the smallest gain since April 2011.
• The number of homes newly listed for sale in December fell 1.3 per cent from November. Greater Toronto recorded the largest drop in new listings.
• Four of every five local markets recorded sales declines in December on a year-over-year basis. Calgary was the great exception, with December sales up seven per cent year-over-year.

Commentary:

• Sales numbers are moving exactly the way Finance Minister Jim Flaherty wants them to. “I don’t mind prices coming down a bit, too,” he told the Globe and Mail.
• There’s little doubt the sales plunge reflects the impact of the mortgage-tighnening rules introduced by the federal government in July, TD Economics’ Sonya Gulati wrote in a note to clients this morning. Still, it might be too early to say whether the finance minister has effectively tamed the housing market: Gulati notes that the impact of the new mortgage legislation is now likely fully priced in, and that the cooling effects of similar tightenings in the past have been only temporary.

$1-million and above homes still finding buyers in Canada: report

By The Canadian Press - Thursday, January 10, 2013 at 8:42 PM - 0 Comments

OTTAWA – While Canada’s housing market appears to be cooling, that may not be the case for homes in the rarefied listings of $1 million and above.

A new report by Sotheby’s International Realty Canada says 2013 looks like a good year for sellers of top-end homes, giving the stable Canadian economy, increasing employment and continuing low interest rates.

The firm says it is so confident that it is expanding into two new markets this year — Quebec City and Edmonton — from the over 20 markets it currently serves, including Montreal, Toronto, Vancouver and Calgary.

For 2012, the realtor says the market was a bit of a mixed bag for $1 million homes and above, particularly after stricter mortgage rules came into place in July.

Some markets, like Calgary saw the sky as the limit, while previously hot Vancouver came down to earth somewhat. Toronto and Montreal experienced modest growth.

In Vancouver, sales in the top-tier market fell 34 per cent to 1,983, and it took 54 days to sell a $1-million or more listing on average in the last six months of the year, well above the first half or the previous year. Still, five per cent of listings sold over asking.

It was a different story in Calgary, where sales of homes listing over $1 million rose 20 per cent to 535 with five per cent selling above asking.

Toronto and Montreal experienced more modest swings from the previous year, but the trend was positive.

In Toronto, sales of top-end homes rose 13 per cent to 4,900, with 11 per cent of those selling over asking price. Montreal sales of $1-million plus homes rose four per cent to 392, only three per cent of those above asking.

Note to readers: This is a corrected version. A previous story contained an incorrect spelling for Sotheby’s

Great Canadian real estate crash of 2013

By Chris Sorensen - Wednesday, January 9, 2013 at 3:59 PM - 0 Comments

Photo Illustration by Stephen Gregory

Keith Roy began warning his clients about a faltering Vancouver housing market in early 2012. The realtor says he was tipped off not by industry statistics, but by chatter across backyard fences. “When you hear about a homeowner who thinks his neighbour got too much money when he sold his house, you know there’s something going on,” says Roy. “That was the first clue.”

The next shoe to drop was a handful of homes in desirable west side neighbourhoods that took a few extra days to sell. Sensing a shift in the market, Roy put his own house up for sale in June and penned a blog posting the following month that advised people to “cash out.” Though he was criticized by fellow agents for breaking rank, Roy says he now feels vindicated after watching Vancouver home sales crumble to their lowest point in more than decade, with prices falling 3.5 per cent since hitting a high last May. The lesson? Recognizing a looming real estate downturn is more art than science; once it shows up in the numbers, it’s too late to do much about it. “One day the phone just stops ringing,” Roy says. “Then you’re in it.” Continue…

Reality TV about housing makes a post-crash comeback

By Jaime Weinman - Tuesday, January 8, 2013 at 12:51 PM - 0 Comments

Who’s placing the biggest bet on the comeback of the U.S. housing market? Not Wall Street, but cable TV channels that run home-buying shows with titles like Love It or List It. The crash of 2008 wiped out a lot of reality shows about purchasing expensive homes; instead, channels like Home and Garden Television and the Learning Channel (TLC) shifted toward shows like The Unsellables, about people whose homes had become worthless. Now, according to the Wall Street Journal, these networks are working on a new cycle of housing shows, though like many cautious owners, they’re starting with cheap homes: HGTV’s future projects include Power Broker and Fixer Upper, about helping young buyers improve their first houses, and TLC is bringing back the show My First Home after a three-year break. Network executives had better hope they’re right about the market. If not, the only people in bigger trouble will be those who actually bought the houses.

Housing starts: The condo market still has lots of air to lose

By Erica Alini - Monday, December 10, 2012 at 10:28 AM - 0 Comments

(Mike Cassese/Reuters)

New construction projects of both single houses and multi-unit homes fell in November for the third consecutive month, the Canada Mortgage and Housing Corporation said on Monday. The seasonally adjusted annual rate of housing starts was 196,125 units last month, a 3.6 per cent decline from a downwardly revised 203,487 units in October. That was below the 201,200 forecast given by analysts polled by Reuters and well under the high of over 250,000 units the market hit in April of this year.

At 58,600 units, construction of single homes hit the lowest level in 16 years excluding the recession period from Dec. 2008 to July 2009. There were fewer new projects underway in the condo market as well, but the decline there was more modest. Multi-family homes fell 3.2 per cent to 115,700. “This simply highlights the oft-repeated point that if you mention overbuilding in Canada, you’re talking about condos,” noted economist Robert Kavcic at BMO.

The Bank of Canada recently singled out the condominium market as the Achille’s heel of Canada’s housing market. “A specific concern,” the BoC wrote in its December Financial System Review, is that the total number of condo units under construction “is now well above its historical average relative to the population.”

Across the country, Ontario and B.C. were leading the downward trend said Mathieu Laberge, deputy chief economist at CMHC. In urban areas, housing fell by 14.3 per cent in Ontario, 16.5 per cent in B.C. and 45.6 per cent in Atlantic Canada. “The drop in starts in Atlantic Canada was primarily due to a decrease in multi-unit housing construction in Halifax, following higher than normal activity in October,” Laberge said. Urban starts were up 15.4 per cent in Quebec and 16.1 per cent in the Prairies.

U.S. new home sales dip 0.3 per cent in Oct., but up for year

By Martin Crutsinger - Wednesday, November 28, 2012 at 11:17 AM - 0 Comments

WASHINGTON – U.S. sales of new homes fell slightly in October and the September sales pace was slower than initially thought.

The Commerce Department said Wednesday that new-home sales dipped 0.3 per cent in October to a seasonally adjusted annual rate of 368,000. That’s down marginally from the 369,000 pace in September, which was revised lower from an initially reported 389,000.

Sales are still 20.4 per cent higher than the same month last year. Still, new-home sales are well below the annual rate of 700,000 that economists consider healthy.

Sales fell a sharp 32.3 per cent in the Northeast, but the government said Hurricane Sandy had only a minimal effect on the housing data because it hit at the end of the month.

The improvement in the new-home market this year follows other reports that show the housing market starting to recover more than five years after the bubble burst.

Home prices are rising, sales are up, and builders are starting work on more new homes and apartments. Continue…

INFOGRAPHIC: Canadians and their mortgages

By Erica Alini - Friday, November 23, 2012 at 1:44 PM - 0 Comments

The folks over at RateHub—a helpful website that lets you compare mortgage rates and figure out how much it will actually cost you to buy a house—have put together a nifty infographic that sums up the key findings of the latest report on the mortgage market by the Canadian Association of Accredited Mortgage Professionals.

Section 3 and 4 are particularly interesting: According to CAAMP, the recent tightening in mortgage rules has shut out some nine per cent of potential home buyers—on average, it will take these buyers an additional three and a half years to squirrel away enough money for a downpayment. Also, a number of Canadians are using home equity to pay off other debt—nothing new here, but always scary to look at.

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Canadian homes slightly more affordable in third quarter: RBC index

By Sunny Freeman - Thursday, November 22, 2012 at 8:17 AM - 0 Comments

TORONTO – Royal Bank says the cost of home ownership became more affordable in the most recent quarter due to a modest decline in home prices and gains in Canadian household incomes.

RBC’s affordability index for a detached bungalow stood at 42 per cent of income nationally in the second quarter.

That means an owner would need to spend 42 per cent of pre-tax annual income to pay for mortgage payments, utilities and property taxes — one percentage point lower than in the second quarter of 2012.

The index fell even more for two-storey homes, by 1.2 percentage points to 47.8 per cent and eased 0.6 percentage points to 28 per cent for condos.

The bank, which publishes the index on a quarterly basis, says ultra low interest rates have been the key factor in keeping affordability levels from reaching dangerous levels in recent years.

Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages.

RBC notes that Canada’s housing market cooled further in the third quarter, partially because of the effects of a fourth round of rule changes to government-backed mortgage insurance.

The bank expects the negative effect of the changes on home sales will ease by the end of the year and that resale activity will stabilize next year.

The July-September quarter fully reversed the mild erosion in affordability that occurred during the first half of 2012, said RBC chief economist Craig Wright.

“The broad affordability picture has been somewhat stationary over the last two years, alternating between periods of improvement and deterioration, resulting in an affordability trend that is, on net, essentially flat,” Wright said.

Wright expects the Bank of Canada to begin raising its overnight lending rate for banks —which affects bank’s prime lending rates — from the current one per cent in the second half of next year, assuming the euro crisis remains in check and U.S fiscal issues are addressed.

“This, along with the expected continued growth in household income, will lessen the risk of marked erosion in affordability,” he said.

Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages,

As is often the case, Vancouver’s extremely expensive real-estate skewed the national figures.

“The cost of owning a home took a smaller bite out of household pocketbooks in the third quarter as home prices fell – most notably in the Vancouver area, though it remains the least affordable market in Canada by a wide margin,” explained Wright.

The index in Vancouver stood at 83.2 per cent of income, followed by Toronto at 52.4 per cent, Montreal 40.2 per cent, Ottawa at 38.7 per cent, Calgary at 38.3 per cent and Edmonton at 31.1 per cent.

Canadian home sales and prices: down but not quite ‘sustainable’ yet

By Erica Alini - Thursday, November 15, 2012 at 11:11 AM - 0 Comments

The Canadian housing market continued along its gradual downward trajectory in October, with sales of existing homes lower compared to both the previous month and year-over-year levels, as prices registered the smallest increase since May 2011, the Canadian Real Estate Association said today.

Home resales dipped 0.1 per cent in October from September and actual, non-seasonally adjusted, sales were down 0.8 per cent from October 2011. Prices were still growing, but moderately, up a modest 3.6 per cent from September, the sixth consecutive month of slowing gains. The price increase for townhouses and condo units was even smaller, at 1.2 per cent and 1.5 per cent respectively.

And in a further sign that supply is adjusting to weaker demand, the number of homes that went up for sale in October was down 3.8 per cent after a jump in September, with the Vancouver and Toronto areas leading the way. Calgary, on the other hand, bucked the trend, topping the charts of local markets that saw year-over-year sales increases and registering faster growing prices as well.

All told, after a strong showing in the first half of the year, the level of home sales in 2012 will likely come in roughly in line with the decade’s average.

Continue…

Real estate: Toronto still defying gravity

By Erica Alini - Thursday, November 8, 2012 at 10:51 AM - 0 Comments

For a while, Canadian builders seemed not to notice that “for sale” signs on people’s lawns were lingering there longer than usual. Sales of existing homes took a dive in September, dropping 15 per cent compared to the same month last year. New residential construction projects, though, were still holding up. No longer. The numbers released today by the Canada Mortgage and Housing Corporation seem to indicate that developers have finally gotten the memo: the market is cooling. There were 17,507 actual housing starts in October, according to the CMHC, which translates to an annualized 204,107 starts—down significantly from 223,995 in September and below the 2012 average.

Now, in a sense, this is of course bad news: it shows that the housing market continues to weaken, which will likely weigh on the entire economy. But in a glass half-full reading of the data, it is also a sign that oversupply problems are likely easing.

Unless, that is, you’re in Toronto. “The monthly decrease in total housing starts posted in October was mostly due to a decrease in both single and multiple starts in urban centres in Quebec and the Prairies. Multiple starts also declined in many urban centres in Ontario, more than offsetting an increase in such starts in Toronto,” Mathieu Laberge, deputy chief Economist at CMHC, said in a statement. The condo building frenzy in Ontario’s capital, in other words, isn’t over yet.

Toronto also defied another housing statistic out this morning: Statistics Canada’s New Housing Price Index. According to the agency, prices of new homes in Canada rose for 18th consecutive month in September, edging up 0.2 per cent compared to the same period last year. The index does not include condo prices, which have been slumping in Toronto. High rises aside, though, the Toronto-Oshawa market is still far in front of all other metropolitan areas:

*Source: Statistics Canada.

Canada’s housing market: is it a cooling? Is it a crash?

By Erica Alini - Wednesday, October 31, 2012 at 9:00 AM - 0 Comments

Last Friday, rating agency Moody’s announced that almost all of Canada’s biggest banks might be in for a credit downgrade, citing “concerns about high consumer debt levels and elevated housing prices.” It was just the latest warning that, after soaring for 14 years, Canada’s housing market might be finally headed back to Earth.

Now, virtually everyone—from the Bank of Canada and the Finance Department through Canada’s banks to the International Monetary Fund and independent analysts—agrees that housing is losing steam and Canadian wallets are overstretched.

But is Canada’s housing market headed for a gracious landing or a face-forward crash? When it comes to predicting how rough a ride it will be, opinions vary widely.

To help Maclean’s readers make up their minds, we’ve compiled a review of prominent arguments supporting bullish and bearish positions on four key questions about the future of Canada’s real estate and what it all means:

Continue…

Flaherty wants to privatize the CMHC

By Erica Alini - Monday, October 22, 2012 at 10:02 AM - 0 Comments

The Globe and Mail is reporting that Ottawa would like to privatize the Canada Mortgage and Housing Corp. in the next five to 10 years, based on remarks made by Finance Minister Jim Flaherty in an interview. Here’s the initial reaction from the Twitterverse:

Housing starts lower in September: CMHC

By Julian Beltrame, The Canadian Press - Tuesday, October 9, 2012 at 9:59 AM - 0 Comments

OTTAWA – Canada’s housing market continued to show signs of cooling last month, but still no evidence of a correction that would seriously impact the economy.

The Canada Mortgage and Housing Corp. reported Tuesday housing starts for September totalled 19,750. That’s 220,200 units annualized, a slight decrease from the upwardly revised 225,300 units the previous month.

The agency said the seasonally adjusted annual rate of urban starts decreased by 3.0 per cent in September to 203,731 units.

But the September number was still above the consensus forecast of about 205,000 and well north of what economists consider would be required to meet the growth rate in household formations.

“In our view, Canada still has overbuilding concerns,” said TD economist Francis Fong.

“Demand for new homes is primarily being supported by accommodative interest rates.”

In a new global outlook released Monday, the International Monetary Fund singled out housing and household debt, which currently sits at a near-record 152 per cent of income, the key areas of concerns for Canada.

“An important domestic vulnerability in Canada relates to the housing market,” the Washington-based financial institution said. “A sharp or sustained decline in house prices could seriously set back the leveraged household sector and domestic demand.”

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Home sales down between July and September; home prices still slightly up

By Craig Wong, The Canadian Press - Wednesday, October 3, 2012 at 6:52 PM - 0 Comments

The average price of a home in Canada crept higher in the third quarter, according to a survey by Royal LePage, but the real estate company warned a softening in prices may be just around the corner.

Royal LePage said Wednesday the average price of a home in Canada rose between 1.8 and 4.8 per cent in the third quarter, depending on the category, but the number of homes sold was slipping.

Fewer homes trading hands, the company said, typically precedes a period of softening prices as sellers adjust their expectations and cut prices.

“During the third quarter, unit home sales were positive in July, fell nine per cent year-over-year in August and we are expecting September to show a decline as well,” Royal LePage chief executive Phil Soper said.

“We had predicted this cyclical change early in the year, a natural market reaction after a period of strong expansion. Changes to mortgage regulations, which took effect on July 9, accelerated the correction.”

Among the changes to tighten the lending rules, Ottawa cut the maximum amortization period for government insured mortgages to 25 years from 30 years, making monthly payments more expensive, but reducing the amount of interest paid in the long term.

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