Canadian Real Estate Market Compared over last 10 years

Mississauga, ON (February 8th, 2011) - Tighter inventory levels helped to make the last decade one of the healthiest periods on record for Canadian real estate, insulating markets in major centres from the peaks and valleys characteristic of past decades, according to a report released by RE/MAX.
The RE/MAX Housing Barometer Report measured monthly sales-to-new listings ratios in 18 major centres across the country from January 2000 to December 2010. The report found strong seller's/balanced conditions prevailed for much of the time frame, prompting significant gains in housing values. The lone exception was when the market dipped into buyer's territory during the latter half of 2008 and early 2009. However, fewer listings served to offset diminished demand and provided greater stability. Average price increases from 2000 to 2010 ranged from an annually compounded rate of return of 4.82 per cent in London-St. Thomas to a high of 9.56 per cent in Regina. The national average was 6.82 per cent. By far the tightest market in the nation was Winnipeg, where seller's ruled the roost for 85 per cent of the decade, followed by Hamilton-Burlington (67 per cent), Regina (63.6 per cent), Kitchener-Waterloo (59.8 per cent) and Edmonton (57.5 per cent).

Teranet-National Bank National House Price Index Results

The housing market in Canada continues to be healthy with modest price increases, but according to the Teranet-National Bank national house price index, the rate of this increase has experienced a significant slowdown.

Released on Wednesday, October 27, the index reflected these findings across the country- a mixture of modest gains in price, compared with modest dips in price, essentially keeping prices fairly flat.

Representing the Western Markets, and bucking the trend of modest price gains, the Vancouver index showed a decline of0.4 per cent and the Calgary index was down 0.5 per cent. It was the second monthly decline in a row for Vancouver.

This balance between modest price gains and decreases is actually a healthy prop up for market prices overall. Says Shahrzad Mobasher Fard of TD Economics in a note to investors, ”If the recent trend of growth in existing home sales and decline in the supply of homes listed on the market is maintained, it should keep a floor under home prices going forward. Prospects for any acceleration in price growth is however, expected to be limited as factors such as the decelerating pace of the economy, high debt loads and weak growth in personal disposable income limit consumers' propensity to spend."According to the Teranet-National Bank national house price index,  August housing prices nationally were (% change m/m y/y):Vancouver -0.4 11.8,Calgary -0.5 5.0,Toronto 0.4 12.5,Halifax 0.9 6.8, Montreal 0.5 7.7 and Ottawa 0.4 10.7. In total the National composite was 0.2 10.4.

These numbers are significant because they reflect the smallest rise in prices since the index began its consecutive climb 16 months ago. Showing the smallest year-over-year price increase in six months, prices were 10.9% higher from August 2009.

Although indications are that the rate of price growth has slowed substantially, prices in the Canadian market still are robust and healthy when compared to our neighbors to the south. In Canada, compared to the pre-recession peak, housing prices are 6.6 per cent higher. However, as yet another symptom of a market in turmoil, prices in the United States are 29% lower than their peak four years ago.  This is one of many stark contrasts between the two markets.

Marc Pinsonneault, senior economist at National Bank Financial Group comments on what the market can expect to see in the near future:  "Looking ahead, prices are likely to fluctuate without tendency over the next few years. At the national level, current market conditions, close to the boundary between balanced market and buyers' market, herald a deceleration in home price deflation. Also, house prices are undoubtedly high, and affordability rests on historically low mortgage rates. People will realize that rates are due to go up sooner or later. When that happens, preference for renting instead of buying should increase."

Source: http://www.propertywire.ca/news/latest/539-teranet-national-bank-national-house-price-index-results.html

Canadian home prices continue to rise

"Canadian home prices are still on the rise even as sales fall as demand peters out, one factor that is making homes less and less affordable, according to a study by the Conference Board of Canada.

Home sales have fallen by 25 per cent since reaching a peak at the beginning of the year as fewer buyers compete and more houses come onto the market. That hasn't stopped houses from becoming more expensive, a trend that is likely to continue, said conference board associate director Michael Burt.

“Most of the costs associated with home ownership, such as mortgage costs and insurance, are outstripping inflation and income growth,” said Mr. Burt, who studies industrial economic trends.

“As a result, housing affordability in Canada, which has been deteriorating over the past decade, will continue to decline during the next two years.”

Canadian home prices were up 13.6 per cent in June from a year ago, according to the Teranet—National Bank composite house price index, released Wednesday. Month over month, June prices were up 1.5 per cent — the largest monthly increase since last August and the 14th straight monthly increase.

Price increases in June were driven by the bustling housing markets of Vancouver and Toronto, where many buyers entered the market in advance of the new harmonized sales tax that took effect July 1 in Ontario and British Columbia.

Recent figures from the real estate brokerage industry show July sales fell 30 per cent and prices were essentially flat.

As more resale houses come onto the market and fewer buyers compete for homes, the housing market is at a crossroads between a balanced market and one that favours buyers.

Many economists predict the sector could move further toward a buyers market, which could be accompanied by a deceleration of price increases, if not outright price drops as seen in the United States.

Marc Pinsonneault of National Bank (TSX:NA) says home prices could soon fall, especially since the introduction of the HST in the hot housing markets of B.C. and Ontario have raised the price of many home purchases

His report on the index — a compilation of average home price changes in six metropolitan areas — suggests that it may be too early to conclude that vigorous price rises in April, May and June represent a trend.

“The prospect of harmonized sales taxes coming into effect July 1 in Ontario and B.C. may have stimulated sales in Vancouver, Toronto and Ottawa in the preceding months,” the report said.

Seasonally-adjusted home sales fell 8.2 per cent in June from the month before and shrunk 19.7 per cent compared to June 2009, according to the Canadian Real Estate Association.

However, the average Canadian home price sat at $342,662 compared to $326,689 in 2009.

Sales activity peaked in December 2009 and hovered near record levels during the first quarter of this year as buyers rushed into the housing market ahead of changes to mortgage rules, interest rate hikes and the HST.

Activity so far this year is up 5.6 per cent compared to the first seven months of last year, but the gap is expected to shrink as the year progresses because sales ramped up heavily during the latter part of 2009.

The strong pace of spending at the beginning of the year indicates the Canadian industry has fully recovered from the recession, and although new home construction activity is expected to slow, housing starts will remain at a healthy level, the Conference Board said in its report.

Housing starts slowed to 192,800 units in June, the slowest monthly pace this year. And home building is expected to slow during the second half of the year.

“The slowdown represents a shift to a more sustainable building pace rather than the beginning of a large correction in demand,” said the Conference Board.

Many economists predict an accompanying deceleration of price increases, with some saying prices could begin to fall modestly by the end of the year.

While performance in the Canadian housing market is weakening, it is faring much better than the U.S. market, where the past three months have been the worst on record for new home sales.

Sales of new U.S. homes dropped sharply last month to the slowest pace on records going back nearly half a century, the latest sign that the economic recovery is fading.

The U.S. Commerce Department said Wednesday that new home sales fell 12.4 per cent in July from a month earlier to a seasonally adjusted annual sales pace of 276,600."

Source: http://www.theglobeandmail.com