Friday, February 22, 2013

Two Housing Myths of 2013

Volatility is the spice of life, especially for economists. It keeps us on our toes. It keeps us questioning the assumptions, forecasts, and even the analysis we do. And it certainly leaves us scratching our heads from time to time. Two head scratchers that seem to permeate contemporary economic and housing market commentary are the great housing crash of 2013 and Vancouver’s notoriously hot condo market.
Home prices are not headed over the proverbial cliff despite repeated attempts by media outlets like Maclean’s magazine to sensationalize a slowdown in consumer demand. Housing market meltdowns are typically caused by household financial disaster at a large scale, caused by such things as a recession or rapidly rising interest rates. In other words, a large proportion of households can’t afford to buy or even keep their homes because of lost jobs or big jumps in monthly mortgage payments.
Those conditions simply don’t describe today’s economy. In fact, employment growth in the province was only eclipsed by Alberta, Saskatchewan and Newfoundland in 2012. And while job growth slowed over the last quarter, part-time jobs are continuing to decline in favour of full-time employment. Combine this with persistently low interest rates, indications of a more substantial recovery in the US, and strong trade diversification globally, and you get a relatively solid foundation to household finances.
Over the past four years, policy makers in Ottawa have deemed it necessary to restrain mortgage credit with the most impactful change coming from a shortening of amortizations on high-ratio mortgage from 40 to 25 years. While some tightening of lending standards was prudent in the wake of the US sub-prime fiasco, the rationale provided by the Federal Government has not always been air-tight, particularly when it comes to Vancouver. When explaining the need for tighter mortgage lending standards, it is common to hear the words “overheated” or “red-hot” when it comes to Toronto and Vancouver condo markets.
Since recovering from the global financial crisis, inflation adjusted condo prices in Vancouver have actually trended some 6 per cent lower since 2009. The same story holds for condo sales, which fell dramatically during the financial crisis, posted a strong recovery, and have fallen well below pre-recession levels since. To an impassioned observer, the Vancouver condo market appears to be entering the fourth year of a quintessential soft landing, where flat prices gradually lead to improved affordability as inflation adjusted prices decline or incomes grow relative to the price level. The Vancouver condo market has not been “hot” for quite some time. Perhaps it is time for federal policy makers to update their talking points.
by Cameron Muir, BCREA Chief Economist
Copyright BCREA – reprinted with permission

Canadian Retail Sales and Consumer Price Inflation

Canadian retail sales declined 2.1 per cent in December, following five consecutive monthly increases. The majority of the decline was sparked by a dip in motor vehicle sales. Excluding motor vehicles sales, retail sales were down 0.9 per cent in December. Canadian retail sales growth for all of 2012 was just 2.5 per cent, half the rate of growth in 2011.

Retail sales in British Columbia fell 0.9 per cent in December and were 0.2 per cent lower year-over-year. For all of 2012, retail sales grew just 2.2 per cent, the weakest sales growth since the 2009 recession in spite of strengthening fundamentals like full-time employment and wage growth.

Weak retail sales point to fairly weak economic growth in both Canada and BC at the end of 2012, which has meant very little upward pressure on inflation. Canadian CPI registered just 1 per cent in January matching the increase in the Bank of Canada's core inflation index. 

copyright BCREA - reprinted with permission

Wednesday, February 20, 2013

US Housing Starts

US housing starts declined in January from a nearly 5-year high in December, registering 890,000 units at a seasonally adjusted annual rate (SAAR).  Building permit data, a proxy for future housing starts, rose to a 925,000 unit annual rate implying that the dip in new home construction last month will be temporary.

The strong recovery in US home construction in 2012 helped boost BC wood product exports by 8 per cent last year and should continue to be an important driver of BC export growth this year.

Copyright BCREA - reprinted with permission

Tuesday, February 19, 2013

BCREA Housing Market Update (February 2013)

BC Real Estate Association (BCREA) Chief Economist Cameron Muir discusses the January 2013 statistics.

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BC Home Sales Remain Subdued but Stable

The British Columbia Real Estate Association (BCREA) reports that a total of 3,410 residential sales were recorded by the Multiple Listing Service® (MLS®) in BC during January, up 1.8 per cent from December on a seasonally adjusted (SA) basis, but down 13.6 per cent compared to January 2012.  Similarly, total sales volume increased 3.8 per cent SA, but declined 16 per cent from the same month last year. The average MLS® residential price in the province was $514,134, up 3.2 percent from December, however, down 2.7 per cent from a year ago.
"Despite a modest uptick in consumer demand last month, home sales have remained relatively stable at a noticeably lower level since last August,” said Cameron Muir, BCREA Chief Economist. “Continuing low mortgage interest rates combined with an easing back of home prices in some areas is expected to trend home sales higher during the spring and summer months."
“The ratio of home sales to new listings is indicative of a balanced market at 42 per cent,” added Muir. “However, there remains a backlog of existing home listings to either sell or be pulled off the market before supply and demand can be considered in check.”
Dramatic swings in average price statistics caused by a surge and subsequent pullback in luxury home sales appear to be near an end. The year-over-year change in average prices now more closely reflects the home price indices in Vancouver and the Fraser Valley.
Copyright BCREA - reprinted with permission

Canadian home sales edge higher in January

According to statistics released today by The Canadian Real Estate Association (CREA), national home sales activity edged up on a month-over-month basis in January 2013. National sales activity has held fairly steady after gearing down last August in the wake of tightened mortgage lending rules.


·         National home sales rose 1.3% from December to January.

·         Actual (not seasonally adjusted) activity came in 5.2% under levels in January 2012.

·         The number of newly listed homes rose 1.6% from December to January.

·         The Canadian housing market remains firmly in balanced territory.

·         National average sale price was up 2% year-over-year in January.

·         The MLS® HPI rose 3.1% in January, the smallest gain since April 2011.

The number of home sales processed through the MLS® Systems of real estate Boards and Associations and other cooperative listing systems in Canada edged up 1.3 per cent on a month-over-month basis in January 2013. This marks the fifth month in a row that national sales activity has shown little change from levels in the previous month.
Home sales picked up in about half of all local markets in January from the previous month, including some of Canada’s most active. Greater Toronto and Greater Vancouver posted monthly sales increases of 5.6 per cent and 4.7 per cent respectively, while sales in Edmonton climbed by nearly 10 per cent on the month. Activity gains there were partially offset by softer sales in Ottawa, the Fraser Valley, Montreal, Regina, London and St. Thomas, and Calgary.
“There is little new to report about national sales activity, which continues to hold fairly steady at the lower levels first reached when mortgage rules were tightened in mid-2012,” said CREA President Wayne Moen. “That said, things are becoming more interesting among local markets, with improving sales in Vancouver and Toronto likely to come as something of a surprise to some. As always, all real estate is local, so buyers and sellers should speak to their REALTOR® to understand how the housing market is shaping up where they live or are considering to live.”
Actual (not seasonally adjusted) activity came in 5.2 per cent below levels reported in January 2012. About two-thirds of local markets posted year-over-year declines in sales activity in January. Notable exceptions include Calgary, Edmonton, Winnipeg, Windsor-Essex, and Guelph.
“Year-over-year declines in activity have received attention lately, and understandably so since they’re more exciting compared to the fairly steady month-over-month trend for national sales following changes made last year to mortgage regulations and lending guidelines,” said Gregory Klump, CREA’s Chief Economist. “If national sales activity remains stable near the levels we’ve been seeing since last August, then year-over-year comparisons will begin fading after the crucial spring buying season. Until then, the focus may remain on how sales were stronger in the first half of last year compared to lower but stable national activity since then.”
The number of newly listed homes rose 1.6 per cent month-over-month in January, their first monthly increase since last September.
New listings rose in a number of Canada’s most active markets, led by Greater Toronto. The monthly increase there reversed a decline of similar magnitude one month earlier. New listings also rose in Greater Vancouver, Montreal, the Fraser Valley, and Vancouver Island, which also marked a reversal in a declining trend for new listings in the final months of 2012.
With sales and new listings both having edged higher, the national sales-to-new listings ratio was little changed at 50.3 per cent in January compared to 50.4 per cent in December. Its reading has held fairly steady around this level for the past six months. Based on a sales-to-new listings ratio of between 40 to 60 per cent, about two-thirds of all local markets were in balanced market territory in January.
The number of months of inventory is another important measure of balance between housing supply and demand. It represents the number of months it would take to sell current inventories at the current rate of sales activity, and it too was little changed in January.
Nationally, there were 6.6 months of inventory at the end of January 2013, down slightly from 6.7 months reported at the end of December. The number of months of inventory nationally has held between 6.5 and 6.7 months since August last year.
The actual (not seasonally adjusted) national average price for homes sold in January 2013 was $354,754, representing an increase of two per cent from January 2012. There were fewer sales compared to year-ago levels in relatively pricey Greater Vancouver, which continues to exert a strong gravitational pull on the national average sale price. Excluding Greater Vancouver from the national average price calculation yields a year-over-year increase of 3.3 per cent.
Unlike average price, the MLS® Home Price Index (MLS® HPI) is not affected by changes in the mix of sales, so it provides the best gauge of Canadian home price trends.
The Aggregate Composite MLS® HPI rose 3.1 per cent on a year-over-year basis in January. This marks the ninth time in as many months that the year-over-year gain shrank and the slowest rate of increase since April 2011.
Year-over-year price gains decelerated for one-storey single family homes (+4.4 per cent) and two-storey single family homes (+3.6 per cent). By contrast, year-over-year growth held steady for apartment units (+1.2 per cent), and picked up in the townhouse/row segment (+2.2 per cent).
The MLS® HPI rose fastest in Regina (+8.8% year-over-year), although the increase was the smallest since December 2011. Price growth also moderated in Greater Toronto (+3.8% year-over-year) and in Greater Montreal (+2.6% year-over-year).
By contrast, the MLS® HPI saw year-on-year growth accelerate in Calgary (+8.0%) and the Fraser Valley (+0.7%). In Greater Vancouver, the MLS® HPI posted a 2.8 per cent year-over-year decline in January.
Copyright CREA -reprinted with permission

806 Victoria, Nelson, BC


Location, Location, Location!  A short stroll to Nelson's historic Baker Street and your favorite coffee shop or restaurant, this home is central to all that Nelson has to offer.  This heritage home was significantly rebuilt in 1992 and has 3 bedrooms plus den and 2 bathrooms.  It will appeal to those who seek an urban lifestyle in the Queen City.  This home features quality upgrades throughout.  Outside you will enjoy a low maintenance landscaped yard that is fenced.  There is also a detached garage off of the lane that would make a great workshop/studio. With views of the city and lake, this home is the complete package at an affordable price.
MLS# K218291

Sunday, February 10, 2013

3930 MacGregor Rd, Nelson, BC

This spacious 4 bdrm, 3 bath North Shore family home offers the best value for homes in its caliber. It features: a large floor plan saturated with natural light allowing seamless transition from room to room, a gourmet kitchen with high-end stainless steel appliances, sunken dining and family rooms, oversize bdrms with an impressive master ensuite and a lovely library area to enjoy. The home is situated only 12 mins from Nelson on a lush .54 acre fenced property offering privacy and an abundance of vegetation, gardens and green space. The full height partially finished basement has a wine cellar, workshop, storage and plenty of space to develop with suite potential. An added bonus is the waterfront access just a short walk away.
Call to set arrange a viewing.
Robert 250-354-8500

Canadian Housing Starts and Labour Force Survey

Housing Starts

Canadian housing starts registered 160,577 units
at a seasonally adjusted annual rate (SAAR) in January, down from nearly 200,000 (SAAR) in December.  Year-over-year, housing starts were 24 per cent lower in January.

New home construction in BC urban centres rose nearly 8 per cent month-over-month in January to a seasonally adjusted annual rate of 21,856 units.  However, on a year-over-year basis, total starts were 19 per cent lower than January 2012. Single-detached starts were 8 per cent higher over last year, while multiples fell 27 per cent compared to January 2012.

Looking at census metropolitan areas (CMA) in BC, Vancouver CMA starts fell 20 per cent year-over-year in January. Single-detached starts were 19 per cent higher than last year, while multiples were almost 30 per cent lower.  New home construction in the Abbotsford CMA was up 25 per cent compared to January 2012. Housing starts in both Kelowna and Victoria were up 12 per cent compared to last January.


After two months of strong gains, the Canadian economy shed 22,000 jobs in January, though a decline in people looking for work pushed the unemployment rate lower by 0.1 points to 7 per cent.

Employment growth in BC is off to an difficult start as employment fell by 16,000 jobs in January. However, an out-sized contraction of the labour force prompted a decline in the unemployment rate to 6.3 per cent.

Copyright BCREA - reprinted with permission

Canadian Building Permits

Canadian building permits declined 11 per cent in December, following a 15 per cent increase in November. The decline in permits was a result of both lower non-residential and residential construction intentions.  For all of 2012, Canadian building  permits rose 9 per cent over 2011, reaching $80.5 billion and surpassing the previous peak set in 2007.

In BC, permitting activity declined 15 per cent in December due to a slowdown in both residential (down 9 per cent) and non-residential (down 27 per cent) permit volumes. For all of 2012,  the dollar volume of non-residential construction permits in BC rose 16 to $10.7 billion.

Permit activity in BC's four major metropolitan areas was mixed in December. Permit values more than doubled from November in the Abbotsford CMA and rose 31 per cent in the Kelowna CMA.  Conversely, permit volume fell month-over-month in the Vancouver CMA by 23 per cent and by 25 per cent in the Victoria CMA.
Copyright BCREA reprinted with permission

Monday, February 4, 2013

2018 Tarry's

Contemporary Country

Just about everything in this home that isn’t new has been upgraded.  The newly completed addition adds more than just square footage to this great family home with a new 4 piece bathroom, extra bedrooms and a country style living room. Ready to move in and enjoy; the more significant improvements of this property include a 1000 plus square foot addition, 200 amp electrical, hardy plank siding, new roof, heat pump, furnace and a new septic system. Located on a secondary road in Tarry’s, this 1 acre property is close to both Nelson and Castlegar. Call Robert @ 250-354-8500 today to set up your appointment to view.  $279,900


US Non-Farm Payrolls

The US economy added 157,000 jobs in January and November and December job growth was revised higher by a whopping 127,000 jobs. Robust jobs numbers further re-enforce that the growth hiccup last quarter was an anomaly brought on by a sharp one-time decline in defense spending rather than underlying weakness in the US economy. The US unemployment rate ticked slightly higher to 7.9 per cent due to an increase in individuals actively looking for work.

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Canadian Monthly GDP Growth

The Canadian economy grew 0.3 per cent in November, following 0.1 per cent growth in October. Production was higher in most industrial sectors with the main contributions to growth coming from manufacturing, oil and gas and mining. 

Our updated fourth quarter GDP estimate is currently reading just 1.1 per cent growth (at an annual rate), in-line with the Bank of Canada's most recent forecast. We anticipate that growth will continue to be modest through the first half of 2013 before accelerating in the second half of the year and into 2014.
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US Q4 Real GDP

The US economy unexpectedly contracted by 0.1 per cent in the fourth quarter of 2012 as growth was pulled down by the largest decline in defense spending in four decades. The US economy expanded 2.2 per cent for all of 2012.

While the modest decline in GDP is likely to spur use of the "R" word (recession) in the media, it is worth noting that today's release is the advanced estimate for real GDP and is subject to revisions which can be substantial. Moreover the contraction in output was almost entirely due to an unprecedented plunge in defense spending, which along with slower private inventory accumulation, pared 2.6 per cent from real GDP growth. In fact, the underlying details of the report were actually quite positive. Consumer spending accelerated on the largest personal income gains in four years while both business spending and residential construction investment grew at a double digit rate. These details, along with strong employment growth in recent months, suggests that US growth will pick-up in the first quarter of 2013.

Copyright BCREA - reprinted with permission

BC Home Sales to Trend Higher in 2013/2014

BCREA 2013 First Quarter Housing Forecast Update

The British Columbia Real Estate Association (BCREA) released its 2013 First Quarter Housing Forecast Update today.

BC Multiple Listing Service® (MLS®) residential sales are forecast to increase 5.6 per cent to 71,450 units this year, before increasing a further 6.1 per cent to 75,830 units in 2014. The five-year average is 74,600 unit sales, while the ten-year average is 86,800 unit sales. A record 106,300 MLS® residential sales were recorded in 2005.

"2013 is shaping up to be a transition year in the BC housing market,” said Cameron Muir, BCREA Chief Economist. “The groundwork has already begun for stronger housing demand as a significant number of part-time jobs in BC were converted into full-time employment last year."  

"Residential values are expected to be on a more solid footing in 2013 as lower prices, both actual and inflation adjusted, have improved affordability. Many potential buyers that stayed on the sidelines in 2012 will likely enter the marketplace over the next year as the relatively strong financial condition of BC households precludes any deflationary spiral."

The average MLS® residential price in BC is forecast to edge down nearly 1 per cent to $510,400 this year and remain relatively unchanged in 2014, albeit up 0.6 per cent to $513,500.

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Consumer Price Index

Canadian consumer price inflation remained subdued in December with prices rising just 0.8 per cent, the same increase that was registered in November.  The Bank of Canada's core inflation index, which excludes the eight most volatile components of the CPI like energy and food, rose just 1.1 per cent year-over-year in December, a moderate deceleration from November.  Inflation in BC registered only 0.4 per cent year-over-year.

Core inflation continues to trend well below the Bank of Canada's two per cent target rate which suggests that the Canadian economy is still operating with a substantial amount of excess supply. Very low inflation no doubt contributed to the Bank's easing of its rate tightening bias earlier this week, pushing a potential increase in interest rates from 2013 into 2014.

Copyright BCREA - reprinted with permission