CHHMA - EYE ON OUR INDUSTRY
Volume 16, Issue 42, November 2, 2016

Inside This Issue:

• Register Now for the Industry Cocktail (November 24th) at Casino de Montreal
• The CHHMA Can Help You Improve Your Negotiating & Business Proposal Development Skills
• Bernie Owens Provides Insight on TIMBER MART to CHHMA Members
• Amazon’s Quarterly Profit Misses Estimates Despite Rise in Revenue
• Lowe’s Appoints New Chief Customer Officer
• Conference Board Says Consumer Confidence Posts Big Drop in October
• Canada’s Economy Grows 0.2% as Resource Sector Rebound Continues
• Growing Online Retail Sales Suck Up the Equivalent of Four Cities Worth of Malls
• Statistics Canada Focuses on Closing Gaps in Key Housing Data
• CMHC Issues ‘Red Warning’ Amid High House Prices in B.C., Ontario; Calls for Slowing Housing Market in 2017
• Two-Sided Real Estate Market Prevails in Canada Report Says
• Canadian Retail Sales Stumble Along
• Latest U.S. Economic News

Association News

Register Now for the Industry Cocktail (November 24th) at Casino de Montreal

This year’s Industry Cocktail is taking place on Thursday, November 24th from 5:30 p.m. to 8:30 p.m., at the Bar Dame de Coeur at the Casino de Montreal.

The location offers a fun and relaxing atmosphere where you can enjoy some wonderful food, drinks and conversation with friends from the industry while enjoying the festive season together.

Click here for further information and to register online.

Click here for a PDF registration form.

The CHHMA Can Help You Improve Your Negotiating & Business Proposal Development Skills

The CHHMA has organized an information-packed one-day learning program that will provide attendees with proven strategies and tips to help improve your negotiating and business proposal development skills.

Don’t delay – register NOW, attend, and get the expert advice and insights you need to improve business results, profitability, and outcomes!

One-Day Learning Program Divided Into Two Sessions:

Morning Session: Secrets of Power Negotiating® – Key Insights for Improving Negotiating Effectiveness

Afternoon Session: Developing Persuasive Proposals

Note: Members/guests cannot register for only one of the two sessions.This is a one-day program.

Date: November 23, 2016

Venue Location:
Centre for Health & Safety Innovation (CHSI)
5110 Creekbank Road
Mississauga, Ontario
(905) 219-0044
http://www.tchsi.ca

Tuition Fee: $399.00 plus $29.95 for course materials (HST not included)

Program Time Frame: This one-day program will run from 8:30 a.m. until 4:30 p.m. There will be one 15-minute refreshment break
in the morning and afternoon, as well as one 50-minute lunch break.

Why You Need to Attend This Impactful One-Day Program:

Effective negotiating and proposal development skills are essential for everyone.The hardware and housewares industry and retail selling/marketing environment have become increasingly complex and competitive. People who work in this industry need to effectively develop and deliver business and line item reviews, propose new products, and/or make recommendations regarding the category, and then they need to be able to negotiate properly with customers/accounts across a wide range of channels. Also, people are negotiating all the time with their colleagues, co-workers, and senior management.

Whether you are an experienced senior manager or a sales/marketing professional looking for a few new ideas and strategies – or a novice looking for the fundamentals – this one-day program will provide you with proven strategies you can implement immediately.

Who Should Attend:

This one-day program is designed for senior management, sales management, all levels of sales and account management, and marketing and customer service personnel.Anyone involved in communicating and negotiating with customers/accounts can benefit from attending.

What You Will Learn:

This highly beneficial one-day program will be divided into two separate sessions. The following are some of the key learnings that will be covered during the program:

• Learn a proven and powerful negotiating process and methodology.
• Be able to effectively prepare and plan for all negotiations.
• Understand the three critical stages of every negotiation.
• Learn the three key factors that influence every negotiation.
• Learn how to properly and effectively make concessions.
• Learn valuable techniques on how to deal with difficult objections in negotiations.
• Learn one key negotiating gambit and corresponding countergambit.
• Learn several powerful negotiating tips, questioning techniques, and phrases that will help to improve negotiating effectiveness and help to optimize outcomes.
• Reduce unnecessary compromise and excessive price discounting.
• Learn a proven formula for how to construct your proposals and business reviews.
• Learn how to improve your company’s value proposition in proposals.
• Learn how to shorten the selling cycle and influence faster decision making by customers.
• Learn how to move away from feature-based communication in your proposals and articulate the real benefits for customers.

Meet Negotiating Coach® Michael E. Sloopka:

Michael is a recognized negotiating and sales process transformation expert and a highly rated professional speaker, teacher, and coach who assists organizations and individuals by joining their team for specific negotiating projects or by training their staff to negotiate and manage customers and vendors more effectively on a daily basis. He is adept at helping his clients build, develop, and maintain high-performing sales and marketing teams. He is also a leading expert in diagnosing selling and buying behaviour and the decision-making dynamics that directly affect the outcome of a negotiation.Michael has written articles or contributed to articles for the Globe and Mail newspaper, Investors.com, Forbes.com, AMEX Open Forum for Small Business, and Selling Power and Profit magazines.

Offering more than 30 years of successful negotiating experience in sales, marketing, purchasing, distribution, and consulting – from small business to multinational corporations, from personal transactions to multimillion-dollar extended supply agreements and contracts – Michael has added hundreds of millions of dollars to his clients' collective bottom line through effective education, consulting, coaching, and negotiation facilitation. He has personally taught tens of thousands of individuals a proven process and methodology, as well as strategies and tactics, to optimize their outcomes. Michael has previously delivered high-impact presentations at various CHHMA conferences and educational sessions.

What Each Attendee Will Receive:

With fully paid tuition, each attendee will receive a bound workbook and the MP3 downloadable version of the Power Negotiator Toolkit Audio Learning Program that includes the following:

• Secrets of Power Negotiating® Audio Learning Program: Almost 6 hours of proven content and advanced material containing all the methodology, strategies, and tactics you will need to become a power negotiator.
• Secrets of Power Negotiating® Key Verbal Phrases and Questioning Techniques: Over 106 minutes of Michael Sloopka’s “best practice” phrases, scripts, questioning techniques, insights, and tips – including numerous personal and business application examples.
• Secrets of Power Negotiating® Personality Type and Corresponding Negotiating Style Self-Assessment: A PDF format
printable version of a self-assessment questionnaire and the interpretation information that you need in order to learn more about yourself and how to interact more effectively with different personalities involved in negotiations.

Spots are limited so register now while you still can for this Impactful Professional Development Learning Opportunity

Bernie Owens Provides Insight on TIMBER MART to CHHMA Members

Mr. Bernie Owens, President of TIMBER MART, spoke to a gathering of CHHMA members in Montreal last Wednesday, October 26th.

During his presentation, Mr. Owens clarified the relationships between TIMBER MART, Spancan and Orgill. He also shared with the audience the current organizational chart and who to contact for what. He also talked about the future of shows for the group as well as drop ship programs and how vendors could better utilize the opportunity to sell more to dealers.

Mr. Owens discussed the culture of the new TIMBER MART, the changes that have taken place since he joined the organization and where he sees the organization and the industry going in the next few years. As a former vendor himself, he gave a few ideas to those present on how they can help support TIMBER MART and grow together.

Those present were very pleased with the content of the presentation and the candid answers to the questions.

We would like to thank Mr. Owens for taking the time to come speak to our members.

A donation from the CHHMA was made on Bernie’s behalf to the Timberkids Charitable Foundation.

Industry News

Amazon’s Quarterly Profit Misses Estimates Despite Rise in Revenue

Amazon.com Inc. reported a lower-than-expected quarterly profit last Thursday as expenses rose and the company provided a disappointing fourth-quarter revenue forecast.

Amazon, whose shares were down 6.8% in after-hours trading, said its net income rose to US$252 million, or 52 cents per share, from US$79 million, or 17 cents per share, a year earlier. It was company’s sixth straight profitable quarter.

But earnings per share were far short of the average estimate of 78 cents, according to Thomson Reuters.

Total operating expenses rose 31.5% to US$10.94 billion as the company invests in Amazon Web Services, expands its Prime program internationally, builds up its warehouse and delivery infrastructure and increases its original video offerings.

Amazon forecast net sales of between US$42.0 billion and US$45.5 billion for the current-quarter, which includes the all-important holiday shopping season.

Analysts on average had expected fourth-quarter sales of US$44.58 billion, according to Thomson Reuters.

Amazon said earlier this month it would hire more than 120,000 seasonal workers in the United States for the holiday season, 20% more than last year, highlighting the growing threat the company poses to traditional retailers.

The company reported a 29% rise in quarterly revenue, in line with expectations, boosted by a big jump in sales from its Prime Day annual shopping festival, strong back-to-school shopping and its market-leading cloud services business.

The world’s biggest online retailer said its net sales rose to US$32.71 billion in third quarter ended Sept. 30 from US$25.36 billion a year earlier.

Amazon said in July that customers placed 60% more orders worldwide in its second Prime Day sale. It didn’t provide sales figures at the time.

Revenue from Amazon Web Services, the company’s cloud services business, surged 55% to US$3.23 billion, beating the average estimate of US$3.19 billion, according to market research firm FactSet StreetAccount.

Long known for heavy spending and losses, Amazon has now found consistent profit from selling computer storage and services in the cloud.

The meteoric rise in sales in the market-leading business reflects how companies globally are turning to Amazon and Microsoft Corp to host their data, leaving once critical software programs and hardware in the dust.

Amazon’s net sales in North America, its biggest market, jumped 25.8% to US$18.87 billion in the latest quarter.

Up to last Thursday’s close of US$818.36, Amazon’s shares had risen 21.1% this year.

Amazon Targets Chinese Demand for Overseas Shopping with Prime Launch

Amazon said it has launched a tailored version of its Prime service in China to tap consumer demand for overseas goods, putting the company in closer competition with local rivals Alibaba Group and JD.com.

Chinese shoppers have been driving a boom in “cross border” shopping with high demand for products, from infant formula to luxury handbags, bought through online platforms like Alibaba’s Tmall International and via informal “daigou” shopping agents.

Amazon is a bit-part player in China, lagging far behind market leaders Alibaba and JD.com. The U.S. firm does, however, offer local shoppers a bridge to sellers in overseas markets.

“The launch of Prime in China represents a new convenient way for Chinese customers to access authentic and quality products from all over the world,” Greg Greeley, Amazon Prime’s vice president, said.

Amazon has been struggling to gain a serious foothold in China, where it held just 1.1% of market share in 2015 according to iResearch, and even launched a store on rival Alibaba’s Tmall platform last year in an attempt to boost sales.

Alibaba and JD.com have also been expanding their cross-border offerings to link Chinese shoppers with global sellers.

Under the Prime service, Chinese shoppers would pay 388 yuan ($57.23) for a year-long subscription, which would give them access to unlimited free international shipping on orders over 200 yuan ($29.50).

Amazon declined to comment on if it would launch other Prime services it offers in the United States in China, including what could be contentious online music and video services.

China has stringent rules on foreign media products. Apple Inc. scrubbed their iBooks and Movies services from the market earlier this year, while this month Netflix abandoned plans to enter the market all together.

Source: Reuters

Lowe’s Appoints New Chief Customer Officer

Lowe’s Companies, Inc. announced last Thursday that Michael P. McDermott has been promoted to the position of chief customer officer, effective immediately. He will report to Robert A. Niblock, Lowe’s chairman, president and CEO. McDermott currently serves as Lowe’s chief merchandising officer, a position he has held since 2014.

In his new and expanded role, McDermott will be responsible for creating experiences that best serve customers and differentiate Lowe’s in an omni-channel environment, including leading customer insights, customer experience design, marketing and strategy. He will also continue to be responsible for overseeing the company’s full merchandising offering for all Lowe’s U.S. stores and Lowes.com, as well as all global sourcing activities.

McDermott will succeed Michael A. Jones, who is leaving to pursue new opportunities.

“We are extremely confident in Mike McDermott and happy that he has agreed to take on these expanded responsibilities and important role,” Niblock said. “Since joining Lowe’s three years ago, Mike has demonstrated exceptional management and leadership skills that make him ideally suited to lead Lowe’s efforts to create an even more exceptional home improvement experience for customers.”

Niblock added, “At the same time, we want to express our thanks to Mike Jones for his many contributions to the company. We wish him well and great success as he pursues future opportunities.”

Prior to serving as head of merchandising, McDermott joined Lowe’s in 2013 as senior vice president and general merchandising manager-building and maintenance, and was responsible for Lowe’s lumber & building materials, millwork, hardware & tools and rough plumbing & electrical divisions.

He joined Lowe’s from General Electric, where he served as sales leader-appliances and was also a member of the company’s corporate commercial council. He brought to Lowe’s more than 20 years of experience in product leadership, merchandising, marketing and commercial sales.

McDermott earned a bachelor’s degree in communications from The College of New Jersey and a master’s degree in political science from Villanova University.

Source: Lowe’s Companies, Inc.

Economic News

Conference Board Says Consumer Confidence Posts Big Drop in October

The Conference Board of Canada says its consumer confidence index in October posted its largest drop since the price of oil first dropped below US$30 a barrel in January.

The Ottawa-based think-tank says the national index fell 6.3 points last month to 96.7.

The survey found that, relative to September, more respondents said their household finances were worse than they were six months ago and expectations also waned about future financial conditions.

Consumers in every region of the country also said they were less likely to buy a big-ticket item, such as a home or a car.

The balance of opinion regarding employment prospects was little changed.

The index in Alberta fell 15.4 points in October to 38.5, while the Saskatchewan-Manitoba region dropped 9.8 points to 74.1.

Quebec fell 9.0 points to 120.0, Ontario slipped 0.5 of a point to 101.2 and British Columbia dropped 8.7 points to 114.8.

Atlantic Canada was the only region to post a gain as it climbed 11.0 points to 129.7.

The online survey was conducted between Oct. 3 and Oct. 13.

Source: The Canadian Press

Canada’s Economy Grows 0.2% as Resource Sector Rebound Continues

Canada’s economy grew by 0.2% in August, due in part to a surge in potash mining and oil extraction.

This marked the third consecutive month that the natural resources sector expanded, recovering after wildfires in Alberta temporarily shut down some oil sands production in the spring.

The GDP growth met analyst expectations. Statistics Canada revised July’s GDP down to 0.4% from 0.5%.

“August GDP provided more evidence that Canada was en route to a hefty third quarter, “Avery Shenfeld, CIBC chief economist, said in a note.

But Mr. Shenfeld said let's not forget that this came after a drop in the second quarter, when the economy shrank amid the fires in oil centric Fort McMurray.

The output of goods-producing industries grew 0.7% in August, with the main contribution coming from mining, quarrying and oil and gas extraction and utilities. Manufacturing and construction were also up, while the agriculture and forestry sector was down.

There was essentially no change in the output of service-producing industries in August. Wholesale trade, transportation and warehousing services, accommodation and food services as well as the public sector (education, health and public administration combined) increased. Declines were posted in the finance and insurance sector and retail trade.

The output of the mining, quarrying and oil and gas extraction sector grew for a third consecutive month, rising 1.4% in August, following four consecutive declines earlier in 2016. The mining excluding oil and gas extraction subsector increased 2.0%, in large part due to a 14% gain in potash mining on the strength of higher exports. Metal ore mining (-1.2%) declined for the third time in four months, as a result of a 5.8% drop in copper, nickel, lead and zinc mining.

There was a 0.9% rise in the oil and gas extraction subsector as both non-conventional (+1.1%) and conventional oil and gas extraction (+0.8%) increased. Production capacity in the non-conventional oil and gas extraction industry has essentially returned to its level prior to maintenance shutdowns in April and the Fort McMurray wildfire and evacuation in May.

After falling for six months in a row, support activities for mining and oil and gas extraction rose 3.5% in August, led by higher activity in rigging and drilling services.

Utilities rose 2.4% in August. Electric power generation, transmission and distribution increased 3.2%, as much of Eastern and Central Canada experienced warmer than usual August weather. This affected demand for electricity, particularly in Ontario, where August heatwaves set new records in many localities, including the Greater Toronto Area.

Manufacturing output rose 0.3% in August as both durable and non-durable goods manufacturing increased.

Durable goods manufacturing rose 0.3%, primarily as a result of increases in primary metal and machinery manufacturing. These gains were partially offset by declines in the fabricated metal product, miscellaneous manufacturing and electrical equipment, appliance and component subsectors.

Non-durable goods manufacturing grew 0.3% as a result of increases in output from the beverage and tobacco and food manufacturing subsectors. The increase in food manufacturing was the fifth in six months and was widespread among most industry groups. Most other subsectors were down, led by petroleum and coal product and chemical manufacturing.

After declining for four consecutive months, construction increased 0.5% in August. The main reason for the gain was a 1.2% rise in residential building construction, related to apartment construction and alterations. Repair construction was up after decreasing five months in a row while non-residential building and engineering construction were down.

The overall real estate and rental and leasing sector was essentially unchanged in August. However, activity at real estate agents and brokers declined 3.2%, the largest monthly decrease since January 2015 and a fourth consecutive decline. There was notably lower activity in British Columbia, where a new 15% property tax on home purchases by non-residents came into effect in August. The output of lessors of real estate increased 0.3%.

After increasing 1.1% in July, transportation and warehousing services grew 0.4% in August. Pipeline transportation of crude petroleum and air transportation were the major contributors to this gain.

Wholesale trade rose 0.5% in August. The gain was primarily attributable to the increased output of miscellaneous wholesalers (which includes agricultural supplies), related to higher exports of fertilizer, pesticide and other chemical products.

Retail trade decreased 0.2% in August. Most store types registered declines, offsetting increases in food and beverage stores and furniture and home furnishings stores.

The finance and insurance sector was down 0.2% in August, the first decrease since November 2015. The decline was the result of a 2.5% decrease in financial investment services (such as investment banking and securities dealing and pension funds). Banking services were up 0.4% in August, led by increased activity in traditional banking services (loans and deposits).

Following a 1.4% increase in July, its highest growth rate since July 2012, accommodation and food services rose 0.4% in August on continued gains in accommodation services. Food services and drinking places were essentially unchanged.

The public sector (education, health and public administration combined) edged up 0.1% in August. Health care and social assistance and public administration edged up, while educational services edged down.

A 0.3% rise in information and cultural industries was the result of increased advertising revenue earned by the radio and television broadcasting industry in August, largely related to the airing of the 2016 Summer Olympics in Rio de Janeiro, Brazil.

Source: Statistics Canada, The Globe and Mail

Growing Online Retail Sales Suck Up the Equivalent of Four Cities Worth of Malls

Online sales in Canada have created a large enough dent in retail sales to fill up all the shopping centres in Vancouver, Halifax, Ottawa and Victoria combined, says a report out Tuesday.

Colliers International, in the fall edition of National Retail Report Canada, says what it calls non-retail sales drove $23 billion in activity in 2014 which represented 4.7% of all retail sales. Much of these sales occur through what are called omni-channel, an industry term for the process whereby shoppers purchase from a retailer but not in-store.

“The worrying statistic for mall owners are that in the U.S., omni-channel makes up 10% of traditional retail sales and omni-channel’s growth rate has averaged three times that of traditional retail,” according to the report, written by James Smerdon, vice-president and director of retail consulting with Colliers.

Smerdon uses an assumption that on average bricks and mortar retailers in Canada were achieving sales productivity of $300 per square foot and says that equates to 76.7 million square feet which is the equivalent of the shopping centre inventory in four Canadian cities.

To illustrate the growth in non-store retail sales, the report notes that in 2012 those sales would have replaced 61.9 square feet. In just two years, non-store retail sales gobbled up 14.8 million square feet of space.

It’s not all bad news for malls. “Despite the growth of non-store sales, malls in Canada are strong — especially in major markets — where brands like Saks, Nordstrom and Holt Renfrew are occupying huge anchor spaces and Hudson’s Bay and Simon continue to hold their own,” writes Smerdon.

Overall, Colliers projects 2016 to be a strong year with retail sales up 4.2% from 2015. Holiday spending will drive the activity and is expected to rise 4.8% in 2016 compared to a year earlier. December retail sales are expected to pass $50 billion for the first time.

Quebec and Ontario will be the main drivers for retail sales, accounting for 57% of the activity across the country. Ontario sales are expected to rise 5.3% this year from a year earlier while Quebec sales will be up 4.5% during the same period.

“The bright light for 2016 retail sales will be the holiday season. In recent years, holiday sales have been relatively anemic compared to stronger year-round growth,” the report states, noting past years have been buoyed by the Black Friday effect in November and gift card redemptions in January.

British Columbia will be the strongest performer in the country for retail sales with growth of 6.6% in 2016 compared to a year earlier. At the bottom will be Alberta with a 0.1% drop in sales — the only province expected to see a decline.

The situation is improving on the retail front in Alberta, which recorded a 4.6% year over year decline in sales from 2014 to 2015. “Alberta seems to have regained its footing,” according to Colliers. “Looking ahead to December, 2016, retailers in Alberta might have something to smile about once more.”

Source: Article by Garry Marr, The Financial Post

Statistics Canada Focuses on Closing Gaps in Key Housing Data

Canada is focusing its attention on the factors driving demand in the country’s housing market, its chief statistician says – including the key data gap Ottawa has highlighted in information about foreign ownership.

In an interview with the Globe and Mail, Anil Arora said foreign ownership in real estate “is a big issue” for policy makers, and the agency plans to begin collecting data from land registries, provinces and other sources, with a feasibility study on how to gather that data scheduled to be published next year. Mr. Arora said the agency is looking broadly at how to improve the quality of its housing data, in areas such as drivers of home prices and how trends compare in different cities.

“It’s an opportunity for us to step back and look at the whole housing statistical framework and say, what is causing these kinds of shifts, and changes and fluctuations in prices, and how can we do that in a uniform way,” he said in his first wide-ranging media interview as chief statistician, conducted at the agency’s Ottawa headquarters. Mr. Arora took over the reins at Statscan on Sept. 19.

The agency’s look at housing comes at a time of concern about overextended households, speculation by foreign investors and rapidly rising house prices, especially in the Greater Vancouver and Toronto markets. Ottawa recently introduced reforms aimed at mitigating risks in the market, including stricter stress testing for borrowers and new rules on the primary residence capital-gains exemption.

The federal government had already identified foreign ownership in the housing market as a key data gap and allocated $500,000 in the past budget for Statscan to explore ways to fill it. The agency is examining how to track housing trends on “a more comprehensive basis, that we can maintain over time,” which means not just looking at new home prices, which it now publishes, but also “existing inventories, condos, multifamily [units]. … Foreign ownership is an important aspect but there are other aspects that we need to take into account.”

The agency said it plans to improve its housing data by developing “within the next five years” a residential real-estate price index that tracks the evolution of housing prices. It will include data on new homes, condos and existing homes “and will provide a much better indicator of overall housing price inflation.”

Housing is not the only area where Statscan has identified data gaps. Other key holes in economic information that Mr. Arora touched on include the effect of globalization on Canada – better capturing the activity of Canadian companies’ overseas operations and foreign companies’ operations in Canada. This means more study of global supply chains, and examining how much value is added from “our companies outside of this country and how does that relate back to Canada in terms of jobs and growth and innovation.”

The latter – innovation – is another area he highlighted: factors that help a company get products and services to market, and why some firms may be better at it than others. Canada has long lagged in global innovation rankings.

Declining household-survey response rates are a key challenge, something he aims to address by exploring new ways of reaching people – be it through social media, texting or cellphones. “If we’re going to tap into the next generation, we have to get on with user-friendly systems that make sense for them to respond to and make it easier, because they’re the future consumers of that information, as well.”

His main goal is to ensure “reliable, trustworthy, timely and credible statistics” are maintained and strengthened, he said, while confidentiality is protected.

Born in India, Mr. Arora came to Canada at the age of 11 and grew up in Edmonton. He started at Statscan’s regional office in Edmonton in 1988 and moved to Ottawa in 1997. He worked at Statscan for 21 years, working on the 2006 census redesign and as assistant chief statistician, before leaving the agency nearly seven years ago to work at Natural Resources and Health Canada.

He rejoined Statscan last month, after its previous chief statistician Wayne Smith resigned over concerns a move to outsource the agency’s IT services hobbled it and put data quality at risk.

Mr. Arora indicated he’s taking a different approach over the matter, saying he’s been in frequent contact with Shared Services Canada, the federal department that currently handles Statscan’s IT issues, and that it has been responsive. “My commitment is to make that work.

“I remain confident that through careful management, we’ll be able to ensure there is continuity of our programs, that all our users can still expect to see the data that they treasure.”

Source: Article by Tavia Grant, The Globe and Mail

CMHC Issues ‘Red Warning’ Amid High House Prices in B.C., Ontario; Calls for Slowing Housing Market in 2017

Canada’s housing agency has issued a red warning for the country’s real estate market last Wednesday amid concerns about high prices in British Columbia and Ontario.

The Canada Mortgage and Housing Corporation (CMHC) said prices are soaring in smaller communities in British Columbia and Ontario as the real estate boom in Vancouver and Toronto spreads deeper into the suburbs.

“We’re seeing the spreading of price pressures,” CMHC chief economist Bob Dugan said in press interviews. “Our concern here is that the price acceleration is becoming more broad-based. It’s concentrated in communities that are close to Vancouver and Toronto.”

Abbotsford (70 kilometres east of Vancouver) and Barrie (90 kilometres north of Toronto) are among the communities where home prices have surged over the past year. It takes about 90 minutes to drive from there to downtown Vancouver or Toronto in normal daytime traffic.

The price for detached houses sold in Abbotsford averaged $643,383 last month, up 28% from a year earlier. Barrie is seeing an upswing too, with the average price for detached properties jumping 24% to $476,668 over the past year.

Many suburbs closer to Vancouver and Toronto have already been part of the spike in prices regionally, prompting some buyers to search farther afield for homes within their budgets.

Skyrocketing real estate prices in both markets have led to increasing unease in Ottawa. The Bank of Canada recently warned that growth is unsustainable, while the federal government has established a working group to recommend ways to make housing more affordable there.

Analysts expect British Columbia and Ontario to account for about two-thirds of this year’s Canadian sales of existing residential properties.

“For Canada as a whole, the growth in house prices remain elevated. After adjusting for inflation, house prices climbed 11% in the second quarter of 2016 from a year ago,” CMHC said in the report. “In combination with the existing evidence of overvaluation, the overall assessment for Canada is thus raised from moderate to strong evidence of problematic conditions.”

Under CMHC’s overall risk ratings of 15 metropolitan markets, it moved Hamilton from moderate (yellow warning) to strong (red warning) risk of problems.

The agency maintained its overall red warnings for Vancouver, Toronto,Calgary, Saskatoon and Regina, meaning there are now six regions displaying “strong evidence of problematic conditions,” with the addition of Hamilton.

“Price growth remains elevated in Vancouver and continues to strengthen in Victoria, Abbotsford and Kelowna,” CMHC said. “The growth in house prices continues in Toronto and is spreading to more adjacent cities.”

Four metropolitan markets are continuing to have moderate risks (Edmonton, Winnipeg, Montreal and Quebec City) while five others are deemed a low risk for problematic conditions (Victoria, Ottawa, Halifax, Moncton and St. John’s).

“To reflect continuing overvaluation, and the widespread price growth in British Columbia and Ontario, the overall level of evidence for problematic conditions in the housing market across Canada is raised to strong,” the federal agency said.

The agency looks at four key signs of concern: “Overheating, price acceleration, overvaluation and overbuilding.”

“We now see strong evidence of problematic conditions overall nationally,” CMHC's chief economist Bob Dugan said in a news release.

“This is fuelled by overvaluation — meaning house prices remain higher than the level of personal disposable income, population growth and other fundamentals would support. This overvaluation coupled with evidence of overbuilding in some centres means that growth in house prices will slow and housing starts are expected to moderate in 2017 and 2018.”

The agency also said it now sees moderate evidence of price acceleration. That occurs when home prices go up at a faster pace and is a possible sign of speculation.Back in July, evidence of price acceleration was weak, the agency said.

CMHC Calls for Slowing Housing Market in 2017 but Prices Will Continue to Rise

In a separate report on the country’s housing outlook, CMHC expects new construction to slow down next year as the market finally catches up to the reality that there are not enough people to live in the houses being built.

“Housing construction is expected to decline slightly in 2016 and 2017 to levels more consistent with economic and demographic fundamentals, before stabilizing in 2018,” the CMHC said in a release.

Nationally, CMHC expects housing starts to be in a slightly lower range than in 2015, between 185,100 and 192,900 units in 2016 and between 174,500 and 184,300 units in 2017. By 2018, the range is expect to stabilize at 172,700 to 183,100 units.

In the existing home market, the Crown Corporation says sales through the Multiple Listing Service will climb from 2015 levels, with the final tally for 2016 between 517,000 units and 533,400 units sold. By 2017, the demographic fundamentals will chip away at activity with the range dropping to 489,500 to 509,700. In 2018, that range will be 488,100 to 511,100 annual sales.

Average prices will continue to increase, but not as rapidly. CMHC said the average home will sell for between $473,400 and $495,000 this year and climb to a range of $483,600 to $507,800 in 2017. The range will increase to $497,700 to $525,100 in 2018.

“These ranges point to higher levels than the 2015 average price of $443,046, but represent a considerable deceleration in 2017 and 2018, as existing overvaluation in most major housing markets are resolved in an orderly manner,” CMHC said.

The single-detached home category, the focus of massive price increases in markets like Toronto and Vancouver, is not expected to get much relief from new construction and consumers are likely going to continue to look towards high-rise condominium purchases.

In the second quarter of 2016, single-detached starts decreased at a quarterly rate of 11.9% compared to the first quarter of 2016, based on seasonally adjusted data. The decrease followed four consecutive quarters of growth, but there has been an overall downward trend since 2009.

“As inventories of new and unsold single-detached homes remain historically low, especially in some of the major housing markets in Canada, homebuyers will continue to shift demand from higher priced single-detached homes to lower-priced alternatives in multi-unit buildings,” CMHC said.

Source: The Globe and Mail, The Financial Post, The Canadian Press

Two-Sided Real Estate Market Prevails in Canada Report Says

Current conventional wisdom holds that Canada has a two-sided real estate market. On one side, the Toronto and Vancouver markets are moving at a breakneck pace, driven by strong economies and foreign investment. But they’re also facing high demand and a woeful lack of supply. On the other side is the rest of Canada, which isn’t faced with the same affordability concerns but still has challenges unique to individual regions.

That is the main message from the Emerging Trends in Real Estate 2017 report (http://www.pwc.com/ca/emergingtrends), put out jointly by PwC and the Urban Land Institute.

The report said investors and developers have continued to turn their attention to Eastern Canada, and Toronto, Montreal, and Quebec City appear to be the principal beneficiaries of this shift in the commercial space. Calgary, still dealing with the impact of the oil sector’s downturn, is holding its own as developers and investors bide their time until better conditions return. While Edmonton’s market has softened, infrastructure projects and downtown redevelopment have mitigated oil’s impact. Halifax is seeing a boom in multi-residential, although worries exist about the “hollowing out” of its commercial core. And in Vancouver, everyone is waiting to see what the long-term fallout from the British Columbia government’s additional 15% property transfer tax on foreign buyers will be. Vancouver real estate had begun softening, although it is not clear how much is attributable to the new tax, and experts anticipate that investors will turn their focus to Toronto.

Retailers’ woes continue to trouble the property sector, though high-end malls and those focused on basic needs are largely expected to continue to do well. Industrial property is benefiting from pent-up demand in the manufacturing sector and the continuing growth of online commerce, which is fuelling demand for warehouses and distribution centers. With office space, the outlook depends in large part on the market in question; the migration to Class A buildings is in full swing, though there are concerns about oversupply and what will be done with outdated properties.

The survey of the Canadian real estate market has uncovered several key trends. Urban core populations continue to rise in the largest markets, and mixed-use developments that combine more than just residential and retail are in high demand. Some developers are capitalizing on this demand by focusing on mixed-use communities—building several structures, often through strategic partnerships, with a plan to create a neighbourhood feel. As cities make greater investments in transit infrastructure, we are likely to see more of these mixed-use communities built around key transit hubs, providing buyers and renters with the option to move out of the core and still maintain an urban lifestyle.

The past year has done little to dispel worries regarding housing affordability, and many Canadians are choosing to rent rather than buy—sometimes by necessity, but often by choice. The new renters include retirees who would rather hold onto the proceeds from the sale of their home and rent a luxury residence, new immigrants to the country, and millennials. The trend is sparking developer interest in purpose-built rentals on a scale not seen in decades.

Technology continues to transform the real estate sector, creating opportunities—and a few headaches—for developers and property owners. Prospective office tenants are demanding greener, more flexible, and more wired spaces. At the same time, this adoption of innovative “workplace 2.0” thinking means that they need less space than before. Technology is even making its way into the residential market, as new building methods and materials become more widespread and buyers demand more energy efficiency and more sustainable products in their homes.

Developers, investors, and property owners are keeping an eye on external events, worried that an international issue could spill over and upset domestic markets. Their top concerns: the potential impact of the U.S. election and the United Kingdom’s vote to exit the European Union. In the year ahead, real estate players appear confident there are still opportunities that can generate profitable growth. Except for concerns about a possible pullback in the Vancouver and Toronto housing markets, Canada seems poised for a year of stability.

Source: PwC and the Urban Land Institute

Canadian Retail Sales Stumble Along

Total Canadian retail sales were up 2.6% in August 2016 versus a year ago, according to the latest numbers from Statistics Canada and on a not seasonally adjusted basis. This rather modest gain was still an improvement compared to the prior month of July.

The underlying 12 month trend appears to have reached a plateau for the current cycle. With the 3 month trend tracking below, things are likely to get softer still going forward.

After 2/3 of 2016, total year-to-date Canadian retail sales were up 3.7%. That's strong performance, especially considering that the gain for all of 2015 was just 1.7%. On the other hand, most of 2016's gain so far happened in the first few months of the year. For the latest 3 months ending August, the increase was much less, at only 2.3% year-over-year. At the current pace, 2016 may end up with only a 2.8% annual gain.

In short, Canadian retail is slowing down going into the final 1/3 of 2016 and the all-important holiday sales season. It looks like it'll be more of a ho-hum rather than a ho-ho Christmas for many retailers.

Food & Drug
The Food & Drug sector appears to stumbling along, but it's actually a result of two opposing fortunes.

Health & personal care stores continue to enjoy strong sales gains, up 9.3% in August year-over-year, and up 7.3% for the latest 3 month period. This is about triple the overall retail average.

On the other hand, food & beverage stores saw sales decline 1.1% in August versus a year ago. After 8 months of 2016, food & beverage stores have eked out only a 1.4% retail sales gain, not even enough to keep up with inflation and population growth.

Store Merchandise
After a hot start to 2016, the Store Merchandise sector has cooled in recent months. For the 3 months ending August 2016, retail sales were up 3.3%. While this is above the current retail average, it's still less than the 3.9% annual gain in retail sales in 2015. The 3 month trend is now tracking below the 12 month trend, which is not a good sign going into the holiday sales season.

As usual, results vary by store type. Retail sales increases are running significantly higher than average at shoe stores and building material and garden equipment & supplies dealers. The opposite is the case for home furnishings stores, jewellery, luggage and leather goods retailers, and electronics and appliance stores, all of which had a year-over-year sales decline for the 3 months ending August.

Automotive & Related
After a rare year-over-year decline in July, automobile dealers bounced back with a 7.8% retail sales increase in August, which was almost triple the overall retail average.

On the other hand, much of the gain at vehicle dealers was offset by significantly lower sales at gasoline stations, which were down 6.2% in August. In the two years from August 2014 to August 2016, gas stations have lost $945 million in retail sales.

To read the full article, click here.

Source: Ed Strapagiel, Consultant

Latest U.S. Economic News

U.S. Consumer Spending Increases Solidly, Inflation Rising
U.S. consumer spending rose more than expected in September as households boosted purchases of motor vehicles and inflation increased steadily, which could bolster expectations of an interest rate hike from the Federal Reserve in December.

The Commerce Department said on Monday that consumer spending, which accounts for about 70% of U.S. economic activity, increased 0.5% after a downwardly revised 0.1% drop in August.

Last month’s increase in consumer spending offered a fairly strong handoff from the July-September period to the current quarter.

The report was published ahead of the beginning of the Fed’s two-day policy meeting on Tuesday. The U.S. central bank is not expected to raise rates at that meeting but is expected to increase borrowing costs in December.

Economists polled by Reuters had forecast consumer spending rising 0.4% last month. Spending in August was previously reported to have been unchanged.

When adjusted for inflation, consumer spending rose 0.3% after falling 0.2% in August.

The spending figures were incorporated into last Friday’s report on third-quarter GDP. Consumer spending increased at a 2.1% annual pace after advancing at a robust 4.3% rate in the prior period.

Despite cooling off, consumer spending combined with a spurt in soybean exports and a turnaround in inventory investment to boost economic growth to a 2.9% pace in the third quarter. The U.S. economy grew at a 1.4% rate in the April-June quarter.

With consumer spending firming, inflation continued to gain steadily. The personal consumption expenditures (PCE) price index increased 0.2% after a similar gain in August. In the 12 months through September the PCE price index rose 1.2%, the biggest gain since November 2014.

Excluding food and energy, the so-called core PCE price index rose 0.1% after rising 0.2% in August. In the 12 months through September the core PCE increased 1.7% after a similar increase in August.

The core PCE is the Fed’s preferred inflation measure and is running below its 2% target.

Consumer spending last month was lifted by a 1.3% surge in purchases of long-lasting manufactured goods such as automobiles. Spending on services rose 0.3%.

Personal income increased 0.3% in September after rising 0.2% in August. Wages and salaries advanced 0.3% after edging up 0.1% the prior month. Savings fell to $797.8-billion from $820.5-billion in August.

Source: Reuters

U.S. Economy Grows at Fastest Pace in Two Years
The U.S. economy grew at its fastest pace in two years in the third quarter as a surge in exports and a rebound in inventory investment offset a slowdown in consumer spending.

GDP increased at a 2.9% annual rate after expanding at a 1.4% pace in the second quarter, the Commerce Department reported last Friday in its first estimate. That was the strongest growth rate since the third quarter of 2014.

Economists polled by Reuters had forecast GDP rising at a 2.5% annual rate in the third quarter.

Despite the moderation in consumer spending, the third-quarter rise in growth could help dispel any lingering fears the economy was at risk of stalling. Over the first half of the year, growth had averaged just 1.1%.

Though the Federal Reserve is mostly focused on employment and inflation, signs of economic strength would be supportive of an interest rate hike in December. The U.S. central bank raised its benchmark overnight interest rate last December for the first time in nearly a decade.

Consumer spending still supported the U.S. economy in the third quarter, even as the pace slowed from the second quarter’s robust 4.3% rate. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 2.1% rate.

A surge in soybean exports helped to shrink the trade deficit in the third quarter. Exports increased at a 10% rate, the biggest rise since the fourth quarter of 2013. As a result, trade contributed 0.83 percentage point to GDP growth after adding a mere 0.18 percentage point in the April-June quarter.

There are concerns that the soybean-driven export growth spurt could reverse in the fourth quarter. Economists, however, also note that exports of capital and consumer goods have been growing strongly in recent months.

Businesses increased spending to restock after running down inventories in the second quarter. Businesses accumulated inventories at a $12.6-billion rate in the last quarter, contributing 0.61 percentage point to GDP growth.

Spending on non-residential structures, which include oil and gas wells, increased at a 5.4% rate in the third quarter, the fastest pace since the second quarter of 2014, after falling at a 2.1% pace in the second quarter.

Investment in mining, exploration, shafts and wells fell at a 31.5% rate in the third quarter after dropping at a 57.4% pace in the second quarter.

Business spending on equipment dropped for a fourth straight quarter, slipping at a 2.7% rate. While the pace of decline has been ebbing as oil prices stabilize and the dollar’s rally gradually fades, a strong turnaround is unlikely in the near-term.

Heavy machinery maker Caterpillar this week reported a 49% drop in third-quarter profit from a year ago and lowered its full-year revenue outlook for the second time this year.

Caterpillar said demand for new heavy machinery had been undercut by an “abundance” of used construction equipment, a “substantial” number of idle locomotives and a “significant” number of idle mining trucks.

Investment in residential construction fell for a second straight quarter, while spending by the government bounced back.

Source: Reuters

U.S. New Home Sales Rise in September; Prior Month Revised Down
New U.S. single-family home sales unexpectedly rose in September, pointing to sustained demand for housing even as data for August was revised sharply lower.

The Commerce Department said last Wednesday that U.S. new home sales increased 3.1% to a seasonally adjusted annual rate of 593,000 units last month, pulling them close to a nine-year high touched in July.

August’s sales pace was slashed to 575,000 units from the previously reported 609,000 units.

“We see tremendous growth potential in new home sales as housing demand continues to grow and a continued shortage of newer vintage homes,” said Tian Liu, chief economist at Genworth Mortgage Insurance in Raleigh, North Carolina.

“The limiting factor to that growth will be the limited supply of land and labour, and homebuilders’ focus on higher price segments.”

Economists polled by Reuters had forecast single-family home sales, which account for about 9.8% of overall home sales, falling to a rate of 600,000 units last month.

New home sales, which are derived from building permits, are volatile on a month-to-month basis and subject to large revisions.

Sales increased 29.8% from a year ago. They rose in the third quarter compared to the April-June period, indicating strong demand for housing.

Residential construction, however, likely remained a drag on GDP in the third quarter.

The broader PHLX housing index, which includes builders, building products and mortgage companies, fell 0.44% in line with a weaker U.S. stock market.

Shares in the nation’s largest homebuilder, D.R. Horton Inc , were trading 1.0% lower. Lennar Corp fell 0.75%, while Toll Brothers slipped 0.64%.

Despite rising demand for housing, home building has been lagging, with builders complaining about land and labour shortages.

Demand is being driven by rising wages as the labour market nears full employment, as well as by very low mortgage rates. Separately, the Mortgage Bankers Association said applications for home loans for last week fell to their lowest level since January.

Last month, new single-family homes sales surged 33.3% in the Northeast and soared 8.6% in the Midwest. Sales in the South, which accounts for more than half of new home sales, climbed 3.4%.

Sales fell 4.5% in the West, which has seen a sharp increase in home prices amid tight inventories.

Last month, the inventory of new homes on the market dipped 0.4% to 235,000 units. At September’s sales pace it would take 4.8 months to clear the supply of houses on the market, down from 4.9 months in August.

The median price for a new home increased 1.9% from a year ago to $313,500. Steadily rising home values are boosting household wealth, which is helping to support consumer spending and prop up the economy.

Source: Reuters

Upcoming CHHMA Events

Secrets of Power Negotiating & Developing Persuasive Proposals One-Day Seminar
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Thursday, November 24, 2016
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Canada Night
Held in Conjunction with the International Home + Housewares Show
Sunday, March 19, 2017
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Tuesday, April 11, 2017
International Centre (Conference Facility), Mississauga, Ontario

CHHMA Maple Leaf Night
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Tuesday, May 9, 2017
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Thursday, May 25, 2017
Club de golf Le Fontainebleau, Blainville, Quebec

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Angus Glen Golf Club, Markham, Ontario

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