Kootenay Connector Real Estate Blog: August 2014

Thursday, August 21, 2014

Labour Force Survey - Revised

Due to an error in the processing of July's Labour Force Survey, employment growth in Canada was revised to a net gain of 41,700 jobs instead of the paltry 200 that was originally reported. While an increase of 60,000 part-time jobs was unchanged, the losses in full-time job growth were revised down from 60,000 in the original report to 18,000. The unemployment rate remained at 7 per cent .

Despite a 4,100 person increase in the labour force, the BC unemployment rate fell to 5.9 per cent from 6.2 per cent in June. The decline was the result of an increase of 4,800 full-time and 16,600 part-time jobs.

In a related release, manufacturing sales in Canada increased 0.6 per cent in June to $52 billion. It was the fifth gain in the last six months. While manufacturing sales edged down 0.6 per cent to $3.56 billion in BC from May, sales were up 10.8 from the previous year.

Today's releases point a strengthening economy that will continue to underpin relatively robust housing demand.

Home Buying Heats Up Over the Summer Months

The British Columbia Real Estate Association (BCREA) reports that a total of 8,493 residential sales were recorded by the Multiple Listing Service® (MLS®) in July, up 11 per cent from July 2013. Total sales dollar volume was $4.65 billion, an increase of 13.8 per cent compared to a year ago. The average MLS® residential price in the province rose to $547,926, up 2.5 per cent from the same month last year.

“Strong consumer confidence continues to drive a summer rally of home sales,” said Cameron Muir, BCREA Chief Economist. “While sales were up in all but one BC real estate board area, the Okanagan has posted a meteoric rise in consumer demand, with the most home sales on record for the month of July.”

“Overall market conditions remain in relative balance in BC,” added Muir, “however, relatively fewer homes for sale have created sellers’ market conditions in some communities."

Year-to-date, BC residential sales dollar volume was up 24.5 per cent to $28.5 billion, compared to the same period last year. Residential unit sales were up 17.2 per cent to 50,376 units, while the average MLS® residential price was up 6.2 per cent at $565,031.

Canadian Housing Starts

Canadian housing starts rose about 1 per cent to 200,098 units at a seasonally adjusted annual rate (SAAR) in July. The six-month trend in Canadian new home construction also increased to just under 190,000 units SAAR.

New home construction in BC urban centers slipped 3.7 per cent on a monthly basis to 25,633 units SAAR. On a year-over-year basis, housing starts were down 16 per cent compared to June 2013. Single-detached starts, which continue to recover from a down year in 2013, were up 21 per cent while multiple units were down 28 per cent.

Looking at census metropolitan areas (CMA) in BC, total starts in the Vancouver CMA were down 20 per cent year-over-year in June, the second consecutive month of double-digit year-over-year decline. Single starts in Vancouver were up 25 per cent, while multiple starts fell 29 per cent. In the Victoria CMA, a large year-over-year decline in multiple starts offset a strong month for single starts. As a result, total starts in the Victoria CMA fell 29 per cent compared to July 2013. New home construction in the Kelowna CMA slowed modestly following several strong months. A drop in both single and multiple unit starts led to an overall decline in total starts of 8 per cent. Housing starts in the Abbotsford-Mission CMA jumped 81 per cent year-over-year due to to a rebound in multiple unit starts and strong single starts.

Canadian Employment

Canadian employment was unchanged in July, though the underlying details betray some weakness in the labour market. Full-time employment declined by almost 60,000 jobs and total hours worked, which is closely associated with economic growth, was unchanged. However, the national unemployment rate ticked 0.1 points lower to 7.0 per cent as the number of people actively seeking work declined.

The BC economy shed 5,300 hundred jobs in July, though all in part-time work. Part-time employment declined 13,700 in July, offsetting a gain of 8,400 jobs in full-time employment. The provincial unemployment rate fell 0.1 points to 6.1 per cent as the drop in people looking for work outpaced job losses in the month. The level of employment in BC is up just 0.5 per cent year-to-date in 2014.

Canadian Building Permits

Growth in Canadian building permits remained strong in June, rising 13.5 per cent from May. The increase was primarily the result of an uptick in permit activity in Quebec and Alberta.

New building permits in BC posted a modest decline, falling 6.2 per cent from May and 6.4 per cent year-over-year. The dollar value of residential permits fell 14.5 per cent on a monthly basis and 9.5 per cent year-over year. On a unit basis, permits fell 16 per cent compared to May, largely due to a decline in Vancouver multiple unit permits. Non-residential permits were up 12.1 per cent from April and were unchanged year-over-year.

Building permit activity was mixed in BC's four census metropolitan areas (CMA). Permits in the Abbotsford-Mission CMA rebounded from a soft May, rising 102 per cent on a monthly basis and 49 per cent year-over-year. Construction intentions in the Kelowna CMA rose 19.2 cent from May and were 50.2 per cent higher year-over-year. In the Victoria CMA, permit activity decreased sharply from a very strong May, falling 31.8 per cent on a monthly basis and 13.4 year-over-year. Finally, in the Vancouver CMA, permits fell 17.8 per cent on a monthly basis and were 22.3 per cent lower year-over-year.

Friday, August 1, 2014

Canadian Monthly GDP (May)

The Canadian economy grew 0.4 per cent in May, a fifth consecutive monthly increase. Contributions to growth at the industry level were broad based, with notable increases in real estate, wholesale and retail trade, manufacturing, and professional services.

Based on two months of second quarter GDP data, we would estimate that the Canadian economy grew a modest 2.2 per cent from April to June. Today's strong release, along with yesterday's impressive US GDP print, will likely dampen any market expectations of future potential Bank of Canada easing which could exert upward pressure on Canadian bond yields.

Broad-Based Demand Lifting BC Housing Markets

BCREA 2014 Third Quarter Housing Forecast Update

The British Columbia Real Estate Association (BCREA) released its 2014 Third Quarter Housing Forecast Update July 31, 2014.

"Stronger than expected consumer demand in the third quarter triggered an upward revision in the housing forecast,” said Cameron Muir, BCREA Chief Economist. “Rising consumer demand is now broad-based across the province, with some of the largest year-over-year gains occurring in the Okanagan and the Kootenay regions."

BC Multiple Listing Service® (MLS®) residential sales are forecast to increase 9.8 per cent to 80,100 units this year, before rising a further 4 per cent to 83,300 units in 2015. The previous forecast was for 76,700 and 81,800 unit sales respectively in 2014 and 2015. The 15-year average is 80,400 unit sales and a record 106,300 MLS® residential sales were recorded in 2005.

The average MLS® residential price for the province is forecast to increase 5.6 per cent to a record $567,300 this year and a further 1.4 per cent to $575,400 in 2015. “Since the housing stock is generally expanding at the same pace as population and household growth, rapid escalation of home prices is not expected over the next two years,” added Muir. BC housing starts are forecast to edge up 2 per cent to 27,600 units this year and a further 1.8 per cent to 28,100 units in 2015.

US Real GDP

On the heels of a 2.1 per cent contraction to start the year, the US economy expanded at a robust 4 per cent annual rate in the second quarter. Growth was driven by stronger consumption spending as well as a large contribution from inventory accumulation, the latter of which is more volatile and less likely be sustained next quarter. It is worth noting that this is a preliminary first estimate of US GDP and is therefore subject to, potentially significant, revisions.

A strong US economy is a key component of the Bank of Canada's outlook for growth this year and next and if the United States economy is truly on an upswing, Canadian exports and business investment should benefit. However, expectations of faster economic growth may also put upward pressure on bond yields and therefore mortgage rates.