Price growth still exceed­ing infla­tion, despite 3.1% decline home sales in April over year earlier

Susan Pigg – Toronto Star

Fears of a hous­ing “melt­down” are unfounded and the Cana­dian hous­ing mar­ket “will be able to pull off the fabled soft land­ing,” says BMO chief econ­o­mist Doug Porter.

Com­ment: Hear hear, a sane man speaketh truth!

In fact, the Cana­dian hous­ing mar­ket is now “calm, cool and col­lected,” notes Porter in the wake of the release of hous­ing num­bers that show sales edged up just slightly in April from March but declined 3.1% year over year.

“While some are high­light­ing the fact that prices are now ris­ing at their slow­est pace since the 2009 reces­sion, the plain facts are that they are still ris­ing faster than infla­tion, and prices are at all-time highs, sug­gest­ing con­cerns of a melt­down were unfounded.”

Even the Van­cou­ver mar­ket, where monthly sales declines since last sum­mer at times hit dou­ble dig­its, sales over­all are down a “mod­er­ate” 6%, Porter noted after the release Wednes­day of the Cana­dian Real Estate Board’s monthly state-of-the-market report.

Porter stressed, how­ever, that it’s too soon to cel­e­brate: Toronto’s con­do­minium mar­ket still remains vul­ner­a­ble to some down­turn, which has so far been far less sub­stan­tial than had been widely expected.

While there has been a down­turn in sales, and some flat­ten­ing in prices, the fact that rental rates have reached record aver­ages of $1,856 per month makes it more likely investors will sim­ply hold on to their units, even if prices slip, he noted.

The April num­bers – as well as those that will come for May and June – are key barom­e­ters, given that the spring mar­ket is the busiest time of year for real estate sales.

The hous­ing num­bers weren’t greeted with the same opti­mism by Cap­i­tal Eco­nom­ics, which reit­er­ated yes­ter­day that it still expects Canada’s house prices could decline by as much as 25% over the next few years.

Com­ment: Wow… even in the face of ris­ing prices every month, these guys still say the sky is falling. When? Tomor­row? The day after that? Ask Garth Turner, he has been mak­ing the same pre­dic­tion for a decade now… but it might still hap­pen – tomorrow.

There is often a delay between the start of declines in sales trans­ac­tions and price declines, econ­o­mist Paul Ash­worth said dur­ing the company’s annual con­fer­ence in Toronto on Wednesday.

Com­ment: Just wait, once we get to July and we have the same mort­gage rules to com­pare, your sales drop will dis­ap­pear. What will you say then? The same thing, I guess, as real­ity does not seem to fac­tor into the equation.

In the U.S., home sales began to drop off in 2005, but prices didn’t start to fall until 2006, he told the conference.

“We’re cur­rently some­where in the mid­dle of that in Canada,” Ash­worth said. “I’m more con­vinced now than I was this time last year that we will even­tu­ally be right.”

Com­ment: Wow… then you are even more wrong now then you were last year. Prices have risen at least 6% since you first made the pre­dic­tion – so don’t prices have to fall 31% now to make your pre­dic­tion accu­rate? In another 5 years you are going to need a 50% drop to make your orig­i­nal pre­dic­tion true…

The April national num­bers show that while home sales slipped, prices are hold­ing steady, pro­vid­ing the mar­ket with what Sco­tia­bank econ­o­mist Adri­enne War­ren termed “decent momentum.”

Buy­ers remain cau­tious thanks to tougher mort­gage lend­ing rules, and mod­er­ate employ­ment and income growth, she notes. “The over­all mar­ket remains bal­anced, with the softer sales envi­ron­ment matched by a lower level of listings.”

The national aver­age price of a home rose 1.3% year over year, although the MLS house price index – a bench­mark of aver­age house prices across the coun­try – grew by just 2.2% in April, the low­est gain in more than two years, CREA said in its monthly state-of-the-market assess­ment released Wednesday.

Com­ment: But it was a GAIN, not a loss. And it was 27.2% more than a 25% decline.

The aver­age price of a home sold in Canada in April was $380,588, but that aver­age con­tin­ues to be weighed down by slump­ing sales in the once super-hot mar­kets of Van­cou­ver and Toronto, the report notes.

Com­ment: Hold up! Sales vol­ume fell in Toronto, prices are still rising.

The num­ber of homes sold was down 3.1% year over year, as activ­ity declined in about 60% of Cana­dian cities. But that’s a 0.6% pickup from March, when sales dropped more than 15% over the same month a year ear­lier, says CREA.

Com­ment: From –15% to –3.1% is a 12% rise, is it not? And really, to cite the dif­fer­ence, 12 is 79.3% of 15, so sales activ­ity actu­ally rose 79.3% NOT 0.6%.

While April is usu­ally marked by a flurry of list­ing and buy­ing activ­ity by house­hunters look­ing to be in their new homes by sum­mer, list­ings were down almost one% from March.

Com­ment: Because of the ter­ri­ble weather, we all know that.

In major mar­kets like Toronto, one of the most cold, dis­mal Aprils in recent mem­ory saw many sell­ers hold off list­ing their homes because they couldn’t get the exte­ri­ors painted and gar­dens were barely bud­ding. And buy­ers were opt­ing to stay home rather than ven­ture out into the cold.

The April num­bers were buoyed, how­ever, sim­ply because of the calendar.

“The Easter hol­i­day and an extra full week­end at the end of the month low­ered March sales activ­ity and the absence of these fac­tors in April helped sales for the month,” notes CREA chief econ­o­mist Gre­gory Klump.

Com­ment: And it is only one month peo­ple, do not read too much into it!

—————————————————————————————————–
Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

Lau­rin & Natalie Jef­frey are Toronto Real­tors with Cen­tury 21 Regal Realty.
They did not write these arti­cles, they just repro­duce them here for peo­ple
who are inter­ested in Toronto real estate. They do not work for any builders.
—————————————————————————————————–

Related posts:

1. Fears of a Cana­dian hous­ing bub­ble unfounded: BMO report Despite sig­nif­i­cant price hikes the last 10 years, house prices…
2. Canada’s hous­ing melt­down? Must’ve missed that CREA’s home price index rose 2.2% in April from a…
3. Rapid rebound fuels fears of hous­ing bub­ble Large mar­kets are skew­ing aver­age prices, cre­at­ing a national picture…
4. Easy credit, soar­ing prices raise new hous­ing fears Cana­di­ans are in the midst of a mort­gage binge,…
5. Cana­dian hous­ing mar­ket will have a soft land­ing Aver­age prices for three com­mon types of hous­ing were up…