Home Resales in Canada Jump in March as Buyers Come Out of Hibernation
Sales of existing homes in Canada jumped in March from February and prices continued to tick higher as the winter deep freeze ended and home buyers started to come back into the market, the Canadian Real Estate Association (CREA) said on Tuesday.
The industry group for Canadian real estate agents said sales activity was up 1.0% last month from February, and February’s gain was revised up to a 0.6% rise, from 0.3% reported previously. The back-to-back monthly gains followed five straight months of falling sales as the particularly brutal winter kept the market on hold.
“The release of pent-up demand from the winter months and a renewed downdraft in mortgage rates will help boost sales further in the coming months,” David Tulk, chief Canada macro strategist at TD Securities, said in a research note.
Actual sales for March, not seasonally adjusted, were up 4.9% from March 2013.
While up from last year, actual (not seasonally adjusted) activity in March ran 8.2% below its 10-year average for the month of March. Results were similar for actual activity for the first quarter: up 2.8% compared to the first quarter of 2013, but 7.5% below the 10-year average for the first quarter period.
“There’s little doubt that winter’s icy grip prompted many potential home buyers to put off house hunting,” CREA Chief Economist Gregory Klump said in the report. “That said, we’ll have to wait and see what happens in April because while overall sales improved in March, there was little evidence of a flood of pent-up demand being released.”
“It’s important to keep in mind the distinction between sales activity and housing demand,” he added. “Some markets, like Toronto and Calgary, are seeing multiple offer situations for some listings where each ultimately results in a single sale. This means national sales are being constrained by a lack of supply despite strong demand in some markets, since Greater Toronto and Calgary combined account for a one-quarter of national activity.”
Canada’s housing market slowed in the final months of 2013 and analysts are waiting to see whether sales will rise again in the spring, the traditional start to the home-buying season. Mortgage rates, which are expected to rise later this year and into 2015, drifted lower in recent weeks, helping spur demand.
While most are predicting a strong spring and summer, analysts expect the market to gradually cool as rising interest rates make homes less affordable.
“Listings have been light over the winter, even relative to the seasonal norm in many cities, so the real test of market health will be seen in the next few months, as both weather and listings warm up,” Avery Shenfeld, chief economist at CIBC World Markets, wrote in a research note.
“House price resilience won’t truly be put to the test, however, until mortgage rates begin to head meaningfully higher in 2015.”
Canada escaped the U.S. housing crash after the 2008-09 financial crisis and home prices have risen dramatically, if not steadily, in the past five years despite federal government moves to tighten mortgage lending rules.
While some economists have predicted the Canadian market will crash, most have said they expect sales and new construction to level off in 2014 and 2015 as mortgage rates rise, with prices continuing to tick slowly higher.
CREA’s March report showed sales rose in more than half of the regional housing markets surveyed, led by gains in large urban market in British Columbia, Alberta and Ontario.
The number of newly listed homes was up 0.5% in March from February. New supply nationally has been running at lower levels since it dropped sharply in December 2013.
The national sales-to-new listings ratio was 52.5% in March, little changed from 52.3% in January and February. Since early 2010, the ratio has remained within a range of 40 to 60%, which marks balanced territory.
The national average price for homes sold in March, not seasonally adjusted, was $401,419, an increase of 6% from the same month last year.
CREA’s home price index, up 5.2% from a year earlier, provides a better gauge of price trends because it is not affected by changes in the mix of sales activity the way that average price is. The slowdown in year-over-year growth compared to a range between eight and 10% since last summer largely reflects a decline in Greater Vancouver’s sales as a proportion of national activity.
The MLS Home Price Index (MLS HPI) provides a better gauge of price trends because it is not affected by changes in the mix of sales activity the way that average price is.
The Aggregate Composite MLS HPI rose 5.19% on a year-over-year basis in March 2014, up slightly from the 5.05% gain recorded in February. Year-over-year price growth picked up among all property types tracked by the index.
Year-over-year price gains were led by two-storey single family homes (+5.97%) and one-storey single family homes (+5.47%). This was closely followed by price increases for townhouse/row units (+4.09%) and apartment units (+3.91%).
Year-over-year price growth in the MLS HPI varied among local housing markets tracked by the index, with the biggest gains again having been posted by Calgary (+9.48%) and Greater Toronto (+7.37%). Meanwhile, Greater Vancouver’s MLS HPI recorded a fifth consecutive year-over-year increase (+3.73%).
Source: CREA, Reuters
Canadian House Prices Flat in March from February, but Up 4.6% From a Year Ago
Canadian resale home prices were flat in March from February and 12-month home price inflation slowed slightly, the
Teranet-National Bank Composite House Price Index showed on Monday.
While national prices were essentially unchanged last month from February, the index, which measures price changes for repeat sales of single-family homes, showed regional disparities, as Calgary roared ahead but Montreal faltered. The Teranet report does not provide actual prices.
“Except for the recession year 2009, this is the first time in 15 years of index data collection that home prices for Canada as a whole have failed to advance in March,” Teranet said in the report.
From a year earlier, prices were up 4.6%, a slowing from February’s 5.0% price gain. It was the first time in nine months that 12-month inflation has slowed.
Canada’s housing market, which has boomed unsteadily for about five years, slowed at the end of 2013 and observers have been watching to see whether homebuyers will storm back in as the spring buying season begins.
“With the spring season underway, we are likely to observe a typical bounce in housing activity so prices will likely remain buoyed over the next few months,” Mazen Issa, senior Canada macro strategist at TD Securities, said in a research note.
“This will be short-lived, however, as the underlying fundamentals point to a soft landing in the housing market.”
Canada escaped the U.S. housing crash that accompanied the 2008-09 financial crisis, and home prices have risen sharply, if not steadily, in the past five years despite moves by the federal government to tighten mortgage lending rules.
While some economists have predicted the Canadian market will crash, most have said they expect sales and new construction to level off in 2014 and 2015 as mortgage rates rise, with prices continuing to tick slowly higher.
“We look for the rate of home price appreciation to remain steady this year before edging lower in 2015, when the Bank of Canada is expected to resume its tightening cycle,” Issa said.
The Teranet data showed that prices rose in March from the month before in six out of 11 cities, fell in three cities, and were flat in two.
From a month earlier, prices rose 1.4% in Calgary, 0.4% in Edmonton, 0.8% in Halifax, 0.6% in Vancouver and 0.2% in Winnipeg.
Vancouver’s gain was the 11th straight monthly increase.
Prices were down 0.7% in Hamilton, 1.8% in Montreal and 0.6% in Ottawa. They were flat in Toronto and Quebec City.
Year-over-year price gains were seen in seven of the 11 cities surveyed.
Compared with a year earlier, prices were up 9.7% in Calgary, 4.7% in Edmonton, 5.2% in Hamilton, 5.8% in Toronto, 7.6% in Vancouver, 0.2% in Victoria and 3.4% in Winnipeg.
Prices compared with a year earlier were down 4.2% in Halifax, 0.7% in Montreal, 1.2% in Ottawa, and 2.4% in Quebec City.
Source: Reuters
New Home Prices in Canada Gain 0.2% Led by Calgary
Statistics Canada reported last Thursday that its New Housing Price Index (NHPI) rose 0.2% in February, following a 0.3% increase in January.
Economists forecast the national index would rise 0.1%, according to the median estimate.
From a year earlier, new home prices increased 1.5% in February, matching the January pace.
The metropolitan region of Calgary was the top contributor to the monthly gain, with prices up 0.9% over the previous month.
Builders reported that higher material and labour costs, market conditions and the implementation of the new home warranty program in Alberta were the primary reasons for the increase.
New housing prices were up in all Ontario metropolitan areas surveyed, except in the combined region of Greater Sudbury and Thunder Bay. Prices in that region were unchanged for the sixth consecutive month.
St. Catharines–Niagara reported the largest monthly price increase in February, with prices rising 1.3%. This was the biggest increase in the region since November 2009. Builders cited that higher material and labour costs as well as market conditions were responsible for the gain.
New home prices rose 0.7% in Kitchener–Cambridge–Waterloo following two consecutive months of decline, while prices were up 0.6% in Windsor. According to builders, higher material and labour costs were responsible for the increases in both regions.
Two metropolitan areas, both in the Atlantic region, reported price decreases. Prices were down 0.4% in Charlottetown, as builders reported lowering prices on inventory homes to generate sales. This was the largest decrease in Charlottetown since December 2012.
New housing prices fell 0.1% in Halifax. Price changes in the region have been fluctuating between 0.0% and a decline of 0.1% for the past five months.
Prices were unchanged in 7 of the 21 metropolitan areas surveyed in February.
As mentioned, on a year-over-year basis, the NHPI rose 1.5% in February, following an identical increase in January.
The two main contributors to the annual advance were Calgary (+6.9%) and the combined metropolitan region of Toronto and Oshawa (+1.7%). The year-over-year increase in Toronto and Oshawa was the largest since September 2013.
Compared with the same month last year, new housing prices were up 3.5% in Saskatoon and 3.4% in St. Catharines–Niagara. Annual prices in St. Catharines–Niagara have been increasing since November 2011.
Other significant year-over-year increases occurred in Hamilton (+2.7%) and Winnipeg (+2.6%).
Among the 21 metropolitan areas surveyed, 4 posted 12-month price declines in February: Vancouver (-1.2%), Ottawa–Gatineau
(-0.9%), Victoria (-0.8%) and Edmonton (-0.1%). This was the third consecutive month of annual declines in Edmonton. Annual prices in Ottawa–Gatineau have been decreasing since August 2013.
Source: Statistics Canada
Young Canadians Increasingly Upbeat About Home Ownership, RBC Survey Suggests
More young Canadians believe owning a home is a very good investment, according to a recent
RBC home ownership poll released last week.
It says 86% of those aged 25-34 believe owning a house or condo is a solid investment, up from a reading of 78% last year, a year when many believed rising mortgage rates would soon make it more expensive to own a house. Rate hikes have reversed since last year.
RBC says that attitude is also reflected in buying intentions, with interest from the 25-34 age group rising to 41% in the latest poll compared to just 25% in 2013.
The bank also says its poll reveals that while 62% of Canadians intend to buy a home with their spouse or partner, 28% of Canadians say they intend to buy a home by themselves.
Top factors considered by those who intend to buy this year include job stability and manageable debt.
And, among those likely to buy a home within the next two years, RBC says four-in-10 will be first time homebuyers.
"The increase in the number of those who feel the housing market is a good investment, as well as the number of those who intend to buy, really highlights that Canadians have no doubt in the strength of the housing market, said Erica Nielson, RBC's vice president of home equity finance.
"When we talk to Canadians, there’s a few key factors that tell them now is a good time to purchase." Ms. Nielson said.
“One is job stability – they feel comfortable and confidence in the job that they have now. The second thing they talk about is manageable debt and the third is the ability to afford the down payment.”
The RBC poll found 40% of respondents said the main thing they were looking for before buying a home was that their debt was manageable, 37% said they would look for job security and 34% would wait until they had a down payment.
Nielsen said, since the rules changed to shorten mortgage amortization to 25 years and demand a higher level of down payment, buyers have become more savvy about what they need to buy a home.
“There’s been a greater awareness that you are taking on debt that is manageable to your personal circumstances,” she said.
That awareness is doubly important in expensive markets like Vancouver and Toronto, she said. But across Canada, homes still are perceived as affordable to young Canadians, Nielsen said.
Ontario, Quebec and the Prairies saw the biggest surge in home-buying interest over last year: In Ontario, 24% said they have intentions to buy this year, up from just 14% in 2013.
In Alberta, 28% said they hope to buy this year, up from 22% in 2013, likely in reaction to house prices that have been climbing significantly in Calgary and Edmonton in particular.
Atlantic Canada and the Prairies also saw some increase in buyer intentions.
The online poll of 2,591 Canadians was conducted by Ipsos Reid between February 4 and 14, 2014.
Source: The Canadian Press, CBC News, The Toronto Star
Canadian Consumer Confidence Rises from Year-Earlier Levels
A new survey says Canadian consumer confidence at the beginning of 2014 was higher than it was one year ago but slightly lower than at the end of 2013.
The
Harris/Decima-Investors Group’s overall consumer confidence index for the first quarter of 2014 stood at 81.2.
That’s up from 77.6 in the first quarter of 2013 but down from 84.4 in the fourth quarter of 2013, which marked a three-year high for the index.
The index tracks responses to consumer attitudes about what lies ahead for the economy and their own financial situation.
The latest survey released on Monday found fewer optimistic responses than in the fourth-quarter and more negative responses.
The index is based on responses from 2,080 people collected between Feb. 20 and March 3.
Fewer than one in five of those responding to the latest survey, 18%, said they were better off financially compared to a year ago – down from 21% in the fourth quarter.
There were also 22% who said they were worse off financially now than a year ago, compared with 18% in the previous survey.
For the long term, the latest survey found 48% were optimistic about where the economy will be in five years – compared with 38% who were pessimistic.
In the fourth quarter of 2013, this split was 50% expecting better times, versus 35% believing there would be unemployment and recession.
In the near term future, roughly one in four respondents said they expect to be better off financially a year from now, compared with 14% who felt they will be worse off.
In the fourth-quarter, the split was 28% optimistic and 10% pessimistic.
Source: The Canadian Press
Latest U.S. Economic News
U.S. Housing Starts Rise Less than Expected, Permits Fall
U.S. housing starts rose less than expected in March and building permits fell, pointing to underlying weakness in the housing market that could persist despite better weather.
The Commerce Department said on Wednesday groundbreaking increased 2.8 per cent to a seasonally adjusted annual rate of 946,000.
February’s starts were revised to show a 1.9 per cent rise rather than the previously reported 0.2 per cent fall. Economists polled by Reuters had expected starts to rise to a 973,000-unit rate last month.
While a brutally cold winter weighed on home building in December and January, activity has also been hampered by shortages of building lots and skilled labor as well as rising prices for materials.
A report on Tuesday showed homebuilders in April were still downbeat about the sector’s near-term prospects. The U.S. housing market is under strain from higher mortgage rates and elevated house prices that are sidelining potential buyers.
Groundbreaking for single-family homes, the largest segment of the market, surged 6.0% to a 635,000-unit pace last month. Starts for the volatile multi-family homes segment fell 3.1% to a 311,000-unit rate.
That was the lowest level since last October.
Permits to build homes fell 2.4% in March to a 990,000-unit pace. Permits for single-family homes rose 0.5% but fell 6.4% for the multi-family sector.
Source: Reuters
U.S. Home Builder Sentiment Edges Up in April, Still Gloomy
U.S. homebuilder sentiment edged up in April but remained mostly dour on lingering concerns about stiff credit conditions for buyers and tight supply of building lots and labour, the National Association of Home Builders said on Tuesday.
The NAHB/Wells Fargo Housing Market index rose to 47 in April from a downwardly revised 46 in March, the group said in a statement. Economists polled by Reuters had predicted the index would rebound to 50 in April.
Readings below 50 mean more builders view market conditions as poor than favourable. The April reading was the index’s third in a row to come in below 50.
“Builder confidence has been in a holding pattern the past three months,” said NAHB Chairman Kevin Kelly, a builder and developer from Wilmington, Delaware. “Looking ahead, as the spring home buying season gets into full swing and demand increases, builders are expecting sales prospects to improve in the months ahead.”
“Headwinds that are holding up a more robust recovery include ongoing tight credit conditions for home buyers and the fact that builders in many markets are facing a limited availability of lots and labor,” NAHB Chief Economist David Crowe said.
The index’s single-family home sales component was unchanged at 51 after the March figure was revised lower by 1 point.
The gauge of single-family sales expectations for the next six months jumped to a three-month high of 57 from 53, which had been the lowest since May.
Prospective buyer traffic was unchanged at 32 after the previous figure was revised lower by a point.
Source: Reuters
Food, Rental Housing Bump Up U.S. Consumer Inflation
U.S. consumer prices rose in March, but inflation pressures remained generally benign, which should give the Federal Reserve ample scope to keep interest rates low.
The Labor Department said on Tuesday its Consumer Price Index increased 0.2% last month as a rise in food and shelter costs offset a decline in gasoline prices. The CPI index had gained 0.1% in February.
Economists polled by Reuters had expected a 0.1% rise last month. In the 12 months through March, consumer prices increased 1.5% after rising 1.1% over the 12 months through February.
The so-called core CPI, which strips out the volatile energy and food components, also rose 0.2 per% in March after edging up 0.1% the prior month.
In the 12 months through March, the core CPI advanced 1.7% after rising 1.6% in February.
The Fed targets 2% inflation and it tracks an index that is running even lower than the CPI. The rise last month could ease concerns among some policymakers about inflation being too low.
In March, food prices increased 0.4% after rising by the same margin in February. A drought in the West has pushed up prices for meat, dairy, fruit and vegetables.
More price increases could be on the way after food prices at the factory gate posted their biggest gain in 10 months in March. Gasoline prices fell 1.7%, declining for a third straight month.
Within the core CPI, shelter costs increased 0.3%, which accounted for almost two-thirds of the rise in the index. Rents increased 0.3%.
There were also increases in medical care, apparel, used cars and trucks, airline fares and tobacco. The cost of recreation, and household furnishings fell.
Source: Reuters
U.S. Retail Sales Post Biggest Gain in One-and-a-Half Years
U.S. retail sales recorded their largest gain in 1-1/2 years in March, in the latest sign the economy was emerging from its weather-induced slumber and on track to accelerate in the second quarter.
The Commerce Department said on Monday U.S. retail sales increased 1.1% last month, the biggest rise since September 2012, as receipts rose in nearly all categories.
U.S. retail sales, which account for a third of consumer spending, had risen by a revised 0.7% in February.
Economists polled by Reuters had forecast retail sales, advancing 0.8% per cent last month after a previously reported 0.3% gain in February.
Retail sales added to employment data in suggesting the economy found momentum at the end of the first quarter after an unusually cold and snowy winter disrupted economic activity at the end of 2013 and the beginning of this year.
So-called core sales, which strip out automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of GDP, increased 0.8% in March.
That followed a revised 0.4% rise in February. Core retail sales had previously been reported to have increased 0.3% in February.
Despite the two consecutive months of gains, a drop in core sales in January suggests consumer spending will slow down substantially from the fourth quarter’s brisk 3.3% pace.
U.S. retail sales last month were buoyed by a 3.1% surge in receipts at automobile and parts dealers. That was the biggest advance since September 2012. Excluding autos, retail sales were up 0.7%, the biggest increase in a year, after rising 0.3% in February.
Sales at building materials and garden equipment stores increased 1.8%, the largest rise in eight months.
Receipts at electronics and appliance stores, however, fell 1.6%. There were also declines in sales at gasoline stations, which fell 1.3%. Excluding gasoline, retail sales rose a solid 1.4%, the biggest rise in four years.
Sales at furniture stores increased 1.0%. Receipts at clothing stores climbed 1.0% as well. There were also gains in receipts at sporting goods shops, restaurants and non-store retailers.
Source: Reuters