I think BMO enjoys needling those that believe a Canadian housing crash is in the works. The latest jab at housing bears comes from BMO economist Sal Guatieri in yesterday’s issue of Focus:
For all the nail-biting over Canada’s housing market, this is where things currently stand: sales have “plunged” to normal levels, starts have “cratered” to household formation rates, and prices have “crashed” to record highs. If this is a bubble, it would appear to have a pretty thick skin.
May sales figures are out in many cities and the market “looks promising” and “is neither blooming nor swooning, but simply following the boring soft-landing playbook.”
Here’s the breakdown:
- Calgary showed strength (no surprise here) with benchmark prices up 7% y/y
- Both Vancouver and Toronto saw price gains for a fourth consecutive month, the latter to record highs.
- A big surprise is that pricey Vancouver saw its first year-over-year sales increase in more than 1½ years. While prices are still down 4.3% from a year ago, they have clawed back some of their 5.9% peak-to-trough decline.
- Perhaps most surprising is that Toronto condo prices jumped to record highs—if there’s one segment of the Canadian housing market that’s over-supplied, this is it.
The reason for the relative firmness in prices nationwide? BMO writes it’s because of:
- supportive demand fundamentals (demographics, decent affordability in most regions, steady job growth), and
- supportive supply fundamentals, namely, owners face little pressure to sell at a discount (especially not after the blow-out May jobs gain).
All in, while tougher mortgage rules have taken the froth out of the market, supportive fundamentals are giving it some backbone. (Source)
Do you think it’s a little early for proclamations and celebrations of a soft-landing or is BMO correct in asserting that the housing market has underlying support?