Canada's housing market shows signs of life
Jamie Sturgeon, Financial Post
Jamie Sturgeon, Financial Post
Published: Wednesday, April 15, 2009
Rock-bottom interest rates combined with some relief from Ottawa to pull the housing market out of its tailspin, industry experts said Wednesday - temporarily, at least.
The cautious optimism stems from fresh figures released by the country's real estate board that show the second consecutive rise in monthly existing-home sales in March after months of decline.
The number of homes bought and sold last month rose by 7% to 31,135 units, seasonally adjusted, compared with February, which was already more than 10% better than January, the Canadian Real Estate Association said.
The pair of readings counter months of declining sales volumes across the country as the market crumbled in tandem with the rest of the economy.
Now, with a little help from the Bank of Canada and federal legislators, the market appears to be stabilizing.
"Interest rates and government stimulus are what's helping right now," said Ron Lawby, president of Century 21 Canada LP, one of the largest realtors in the country.
Lenders have dropped their rates in lockstep with the central bank, while recently introduced incentives from Ottawa are "causing people to say, ‘This is a time I can access the market,'" Mr. Lawby said.
Specifically, two measures introduced within the federal budget's stimulus plans are bringing buyers around; an increase in the allowable withdrawal from registered savings plans for first-time buyers to $25,000 from $20,000; and a tax credit of $5,000 home buyers may count against their incomes.
"Housing markets are starting to show signs of buyer interest," said Dale Ripplinger, president of CREA.
As the aim of the incentives from Ottawa would suggest, the greatest demand is occurring down market.
"It really is first-time buyers," Mr. Lawby said. "We're seeing some activity moving up, but the majority is in entry-level homes."
Other indicators released by CREA Wednesday suggested some stability is returning.
The average price for homes sold remained depressed yet the year-over-year decline is shrinking.
The average residential price across Canada was $288,641, or 7.7% lower last month than the average price recorded in March, 2008. Yet it was the narrowest year-over-year margin registered in the last six months, and the second month in a row in which the pace of decline eased.
"People are looking at the cost of borrowing money - with interest rates as low as 3% - combining that with the fact that there is cheaper product on the market and [they're] stepping in," said Michael Polzler, regional director for Re/Max Ontario-Atlantic Canada.
The flood of unsold listings is also drying up. CREA said Wednesday 208,755 existing homes were for sale last quarter, down 6.4% from the final quarter of 2008.
Still, most economists were reserved in declaring a firm bottom is at hand. Bank of Nova Scotia's Derek Holt said the two-month bounce in sales signals "sounder conditions" but cautioned that there remains plenty of new homes that need to be bought.
"Inventories are still high which speaks to downside risks to prices," he wrote in a note to clients. The upturn is also benefiting from seasonality, Century 21's Mr. Lawby said, noting sales are usually strongest between the beginning of March and June.
Millan Mulraine, economics strategist at TD Securities said a worsening employment picture means the bank expects "overall housing market activity to remain soft in the coming months."
Meanwhile, new data from the United States Wednesday indicated its moribund real estate market is showing signs of life - or at least a small degree of optimism.
After the National Association of Home Builders/Wells Fargo index of builder confidence reached a record-low of 8 in January, it rose higher than expected to 14 last month. The index of current single-family home sales rose to 13, while the gauge of buyer traffic was also higher from February as sentiment among builders in all four regions in the U.S. improved.
The confidence survey asks builders to characterize current sales as "good," "fair" or "poor." A reading of below 50 is considered poor.
Rock-bottom interest rates combined with some relief from Ottawa to pull the housing market out of its tailspin, industry experts said Wednesday - temporarily, at least.
The cautious optimism stems from fresh figures released by the country's real estate board that show the second consecutive rise in monthly existing-home sales in March after months of decline.
The number of homes bought and sold last month rose by 7% to 31,135 units, seasonally adjusted, compared with February, which was already more than 10% better than January, the Canadian Real Estate Association said.
The pair of readings counter months of declining sales volumes across the country as the market crumbled in tandem with the rest of the economy.
Now, with a little help from the Bank of Canada and federal legislators, the market appears to be stabilizing.
"Interest rates and government stimulus are what's helping right now," said Ron Lawby, president of Century 21 Canada LP, one of the largest realtors in the country.
Lenders have dropped their rates in lockstep with the central bank, while recently introduced incentives from Ottawa are "causing people to say, ‘This is a time I can access the market,'" Mr. Lawby said.
Specifically, two measures introduced within the federal budget's stimulus plans are bringing buyers around; an increase in the allowable withdrawal from registered savings plans for first-time buyers to $25,000 from $20,000; and a tax credit of $5,000 home buyers may count against their incomes.
"Housing markets are starting to show signs of buyer interest," said Dale Ripplinger, president of CREA.
As the aim of the incentives from Ottawa would suggest, the greatest demand is occurring down market.
"It really is first-time buyers," Mr. Lawby said. "We're seeing some activity moving up, but the majority is in entry-level homes."
Other indicators released by CREA Wednesday suggested some stability is returning.
The average price for homes sold remained depressed yet the year-over-year decline is shrinking.
The average residential price across Canada was $288,641, or 7.7% lower last month than the average price recorded in March, 2008. Yet it was the narrowest year-over-year margin registered in the last six months, and the second month in a row in which the pace of decline eased.
"People are looking at the cost of borrowing money - with interest rates as low as 3% - combining that with the fact that there is cheaper product on the market and [they're] stepping in," said Michael Polzler, regional director for Re/Max Ontario-Atlantic Canada.
The flood of unsold listings is also drying up. CREA said Wednesday 208,755 existing homes were for sale last quarter, down 6.4% from the final quarter of 2008.
Still, most economists were reserved in declaring a firm bottom is at hand. Bank of Nova Scotia's Derek Holt said the two-month bounce in sales signals "sounder conditions" but cautioned that there remains plenty of new homes that need to be bought.
"Inventories are still high which speaks to downside risks to prices," he wrote in a note to clients. The upturn is also benefiting from seasonality, Century 21's Mr. Lawby said, noting sales are usually strongest between the beginning of March and June.
Millan Mulraine, economics strategist at TD Securities said a worsening employment picture means the bank expects "overall housing market activity to remain soft in the coming months."
Meanwhile, new data from the United States Wednesday indicated its moribund real estate market is showing signs of life - or at least a small degree of optimism.
After the National Association of Home Builders/Wells Fargo index of builder confidence reached a record-low of 8 in January, it rose higher than expected to 14 last month. The index of current single-family home sales rose to 13, while the gauge of buyer traffic was also higher from February as sentiment among builders in all four regions in the U.S. improved.
The confidence survey asks builders to characterize current sales as "good," "fair" or "poor." A reading of below 50 is considered poor.
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