January 2010 New Housing Prices in Canada
For the 3rd consecutive month, the NHPI registered a 0.4% increase. It also recorded its first year-over-year increase since December 2008 with a slight 0.1% increase from January 2009.
Source: Statistics Canada
The largest month-over-month increases were:
- St. John’s (+1.7%)
- Winnipeg (+0.7%)
- Toronto (+0.6%)
- Oshawa (+0.6%)
- Ottawa–Gatineau (+0.5%)
- Saskatoon (+0.5%)
- Calgary (+0.5%)
Statistics Canada reports that in “St. John’s, prices rose as builders reported new 2010 list prices as well as increased labour costs. In Winnipeg and in Toronto and Oshawa, the increase in prices was primarily attributed to higher list prices introduced in the new year.”
Despite the month-over-month increases, many cities (including Calgary) were down year-over-year:
- Edmonton (-6.5%)
- Saskatoon (-2.3%)
- Calgary (-0.6%)
- Victoria (-7.3%)
- Vancouver (-1.0%).
“Declines slowed in most of Western Canada’s metropolitan regions as new housing prices were returning to the price levels observed prior to the highs registered at the end of 2007 and the beginning of 2008.”
Source: Statistics Canada
Looks to me like prices will go up a bit more and then come crashing down, once again.
Unless someone is going to say “We are different here”, look at Edmonton down -6.5% YoY.
This is a leading indicator of where Calgary is headed too and Edmonton vs Calgary is Apples vs Apples.
With 1 month to go till it’s harder to qualify for a mortgage and 45 days after that till rates go up I’d be a fence sitter on buying and an agressive seller if selling.
Risk vs reward (upside). I don’t see much upside to put capital (my cash) at risk here.
Mike
Not Mike F:
I wouldn’t confuse the New House Price Index with a leading indicator – it obviously lagged the resale market on the way down and is doing the same on the way up. I don’t know why but it seems New House prices are “stickier” than resales.
I’ll put up the seasonal adjusted stats in a couple of days, but it looks like the run up in listings and therefore inventory we’ve seen in January and February is slowing down (when adjusted for seasonality). I’d say the near term outlook is still “meh” for the next couple of months.
Interesting the median and mean are way up this month but price per square foot is down. Mike F are there more 2 story homes being sold and fewer bungaloes now?
Jimmy, up until the 15th the same amount of bungalows have sold as compared to last month while there have been more 2-storey sales (just as you thought)
February
2-storey: 281
Bungalow: 136
March
2-storey: 348
Bungalow: 136
There are also many other factors that affect the price per square footage such as upgrades and extent of development (basement), lot size and location (views) , upgrades, etc.
I prefer using the price per square footage only when comparing similar properties (ie. units in a condominium building)
Inventory is up 22% in 17 days. I expect inventory increases in March, but 22% in 17 days is quite a bit.
Noticed that inventory increase also. Quite amazing. Not sure to what extent that’s out of whack with normal “pre-spring” inventory rises though, or to what extent sales are up over last month. Odds are it’s probably not as bad as it seems.
Kevin over at EHB posted this today, a report by someone from York University.
“The Elusive Canadian Housing Bubble”
Lengthy, but worth a read.
Scribd version:
http://www.scribd.com/doc/28454918/Canadian-Housing-Bubble
PDF:
http://www.zerohedge.com/sites/default/files/Canadian-Housing-Bubble.pdf
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Mike Fotiou says: Thanks for posting the link!
Update on seasonally adjusted stats so far for March:
Inventory rise, expected to be 10% over the month, is well ahead of pace. This is related to increased listings: they usually increase about 19% in March and are well ahead of that. Keep in mind my seasonally adjusted data only goes back to 2005 for this stat.
Sales are also well ahead of pace however, usually increasing 21% and up 30% so far. This explains the low absorption rate despite increasing inventory.
Sales:New Listings is behind pace: it should be about 48% if we were following February’s numbers in a usual year. Right now we are at 43%. Since October 2009, it has lagged behind which implies that the market is slowing down. Through most of last spring, this number was red hot.
Ab rate is still quite balanced, but not quite where it “should” be. We are at 3.1 now where we should be at 2.7 by the end of the month.
Days on market is pretty close (34 vs 31)to where it should be, in keeping with the increased sales numbers.
I’m sure the biggest surprise to the bears who read this board is the continued increase in price. We are just below the expected numbers at the end of this month: a mean of 475k and a median of 422k.
Keep in mind my seasonal data goes back to 2002. Over that time we’ve seen an average 8.1% annual increase in the mean so it probably is based on more “bull” years. What this means is that mean and median may actually be right on target. If you look back, the usual increase in mean price over March is 3.7% which is far higher than any other month, so this should be expected.
If I were looking for explanations for all this, I would say that sellers are likely more nervous this year and may be getting houses on the market earlier in the year. There may be many rented units that are entering the market as CM pointed out a while back. At the same time, historically low mortgage rates are priming the buyers.
Inventory is still too low to really put a damper on prices. It’s possible we may see that happen by late summer or fall.
I expect the Calgary media to make a big deal about the (currently 12%) year on year price increase this month. This sentiment might actually result in people holding off selling, expecting the market to go up further. We’ll see if that plays out…
The article “the elusive Canadian Housing Bubble” is quoting people like Peter Schiff and Dr. Roubini.
I would like to mention that I watched Jim Rogers and Mark Faber this week on BNN and both of them were very optimistic about the Canadian economy and fiscal policies of our government.
Mark Faber is well know as the author of the gloom, doom and boom report, and he actually mentioned in this interview that he was planning to buy a home in Canada in the near future.
That would probably be in Vancouver since he is on the board of Ivanhoe.
Mark and Jim are even more negative about the US economy and fiscal policies of the FED then Peter Schiff and Dr.Roubini.
BB
That project that you posted CM had me fooled for a while. I actually mistook it for an academic study, but it makes an important logical error from the start.
In analyzing a topic to produce an answer to a question, you do not reach a conclusion first and then bring up the facts that support it, while ignoring any data that goes against it.
He does a good job at presenting his side and I kept thinking I would see something balanced until I found out 60% of his book sources were Garth Turner. A lot of his data is sound but certainly one-sided. His online sources include a who’s who of permabear sites.
It would help if he at least acknowledged such inconvenient data as Canadian’s high percentage equity in their homes (almost double what Americans had last year), and the fact that long term inflation is accompanied by a rise in wages as well. Like many bears, he wants his high interest rates and his wage and employment deflation at the same time. That ain’t happening. He’s also ignoring immigration, and the commodity price increases that will underpin the Canadian economy and inflation for years to come.
If we couldn’t pop the Canadian real estate “bubble” with the worst financial disaster in 80 years, then it wasn’t really there to be popped I’m afraid. We might be in an interest-rate dependent market right now but that doesn’t necessarily equal a bubble.
Here’s something interesting about his data on page 13 though – Calgary is the most affordable major city in Canada and is just as affordable now as it was through most of the 1990s. That surprised me.
Jimmy, thank you very much for your update on seasonally adjusted stats! Another point I found interesting is that although condo prices are up, sales are slightly lagging compared to last month at this time:
Feb 1-21: 412
Mar 1-21: 394
With regards to the “Elusive Canadian Housing Bubble,” I think it’s good to read other viewpoints. For instance, when there are press releases like “Housing Bubble Talk Dismissed by Board” in MSM, it’s important that consumers have an opportunity to read a report with a different angle and come to their own conclusions.
In other news, the Competition Bureau has rejected CREA’s overhaul of the rules, which was entirely expected.
Mike F, I don’t think MSM actually (inc CanWest Global Media) caries much media weight anymore. MSM has been heavily critised for just printing press releases with no objectiveness from them.
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