CREA released the nationwide statistics for the month of January and the only thing clear is that bank economists can’t agree as to the direction of the Canadian housing market.
Let’s start with BMO. They already see a glimmer of hope for a price bottom this spring:
Canadian Housing – Where’s the Crash? The decline in home prices in recent months has been entirely consistent with the soft patches seen after prior episodes of mortgage rule tightening, and January’s results point in the direction of stabilizing sales and prices for most markets.
The spring selling season will be key in determining if prices again find a floor, and with still-low mortgage rates, a 4-year low jobless rate and surging equity markets, don’t be shocked if they do, at least in the vast majority of markets.
TD bank sees continued weakness over the next several years:
Although the air continues to seep out of Canada’s formerly red-hot housing market, today’s data provided some hints that the sharp decline in activity over the second half of 2012 may be beginning to stabilize just in time for the all-important spring market.
In our view, some near-term firming in trends would not be surprising in light of our research that shows that the immediate negative impacts on sales following changes to mortgage insurance have typically subsided after about 2-3 quarters. The latest rule changes were implemented in July 2012. What’s more, both continued low lending rates and employment trends remain supportive to housing demand under the surface.
That being said, we still subscribe to the belief that a further moderate adjustment is likely in store for Canadian housing over the next few years. This is especially the case for prices, which have recorded a hefty run-up since 2006 and where a correction thus far has been elusive.
Meanwhile, Scotiabank contends that the weakness is not just limited to problem cities:
Regardless of the month to month volatility, it’s the trend that matters and for that, I would look to the year-over-year movements and sales are down markedly on trend.
One of our major views on housing over recent years has been that excess has not just been concentrated in a handful of markets like Vancouver as some of our competitors have argued. The excesses have been nationwide, as illustrated by a now nationwide retrenchment.
-Daily Points February 15, 2013
And finally, RBC sees a period of mild weakness as opposed to a crash:
Despite the market generally remaining in balance, home prices are still moderating in most major markets in Canada, at least from a month-to-month perspective. Further moderation is quite possible in the near term – indeed this is what we expect – but more stable demand and fewer new listings in recent months (notwithstanding the small January increase) will work to put a floor under prices as well. Barring unexpected shocks to our economy – or to the housing market more specifically – we believe that the most likely outcome for Canada’s housing market this year is one of mild weakness as opposed to a crash landing.
Therefore, we expect demand for housing to weaken slightly in 2013, continuing the trend that led to a small 1.2% decline in home resales in 2012. We project home resales in Canada to fall from 453,200 units last year to 439,200 units this year, and prices to decline by 1.5% overall in Canada in 2013 and almost 2% in 2014.
After a period of sustained period of strong housing market activity, somewhat strained affordability, concerns about household indebtedness and global uncertainty will restrain housing demand. Continued employment growth, low interest rates and population gains, however, will provide some support. Markets where the economy is strongest, such as Alberta, will outperform. Conversely, local markets where affordability is poor, such as Vancouver, face greater declines.