5 Signs a Canadian Housing Recovery is On the Way

Housing starts, home sales and building permits are starting to pick up again (although, in the case of housing starts, it's a stuttering start). Here's a look at some of the numbers that, economists say, indicate Canada's housing market is on the mend

1. Housing starts expected to rise

Canada Mortgage and Housing Corp. reported yesterday that the seasonally adjusted annual rate of housing starts decreased to 132,000 units in July from 137,000 units in June after two months of gains. CMHC said the starts statistics - which mark the actual beginning of construction - are expected to improve throughout 2009. The reason? "Over the next several years, housing starts will gradually become more closely aligned to demographic demand ... currently estimated at about 175,000 units per year," CMHC said.

How solid is this foundation? Economists' opinions are mixed. BMO Nesbitt Burns economist Robert Kavcic said July results indicate a rain delay, rather than a reversal. Unseasonably soggy weather caused "a puddle on the road to recovery," he said.

However, Toronto-Dominion Bank economist Pascal Gauthier noted that the July results, which were dragged down by fewer starts in the condominium sector, were below expectations. Starts rose in May and June, and economists had anticipated a third consecutive monthly increase. "The latest data for July is yet another warning that extrapolating the bounce back from [the earlier] extreme lows ... can be overly optimistic," he wrote.

2. Building permits have bounced higher

"Building permits not only held on to the big bounce in May, they were revised higher (to 15.5 per cent) and they rose again in June (up 1 per cent) in another sign that construction is recovering from the extreme lows earlier this year," Bank of Montreal said in a research note. In June, the value of building permits was $5.2-billion, 1-per-cent higher than the revised $5.1-billion measured for May. Residential permits rose 0.5 per cent to $2.7-billion, marking the fourth month in a row in improvement.

3. Existing home sales soar

Nowhere has the turnaround been more apparent than in July sales of existing homes in Canada's biggest cities, BMO reports. "[S]ales in Greater Vancouver were up a massive 89 per cent year over year, a world away from a 70-per-cent drop last November. Toronto is a little less frenetic, but managed to post a 28-per-cent year-over-year gain in July."

Edmonton also reported a 28-per-cent increase in the number of homes that changed hands year over year and, in Calgary, the level of resale activity was up 22 per cent year over year.

4. It's still a buyers' market, but prices are firming up

Economists expect that when the Canadian Real Estate Association reports on the overall national picture Friday, the data will show that average prices are up about 4 per cent year over year - skewed upward by sales in higher-priced markets. The Toronto Real Estate Board, which has already published its July results, reports that the average price for July transactions was $395,414, up 6 per cent from the same month last year.

BMO reports new home prices "are a bit slower to turn, and we believe [today's] report on that front will show a 3.2-per-cent year-over-year decline for June."

5. Affordable mortgages

"We're probably at the best point of [mortgage] affordability right now," said Bank of Nova Scotia economist Adrienne Warren in a Let's Talk Investing video posted on globeandmail.com, noting that interest rates are starting to drift up again. She cautioned, however, that job-loss fears are keeping a lot of consumers on the sidelines.

VIRGINIA GALT
Globe and Mail
Wednesday, Aug. 26, 2009 03:25AM EDT

Please call if you would like a free evaluation of your financial situation as home ownership may be closer than you think.

Cheers
Krista and Sherri
Lawless Brown Mortgage Brokers
Victoria BC