Current Market Conditions

​More listings have sold in the first 3 months of 2016 than during the same period in 2015.  Not only that, these homes sold on average 34 days faster this year.  Now consider the fact that so far in 2016 there were 16 fewer new listings than during the same 3-month period in 2015.


Here is a look at the numbers..

• the sell to list ratio is up from 95.53% to 97.99%,
• the average days on market is down from 172 to 138
• the total sales is up from $6,824,250 to $8,826,900
• and the number of new listings is down from 41 to 25!

Source: KREB Area Detailed Summary March 2016 year over year Nelson Residential Sales Stats 

Bank of Canada Cautious About the Outlook

To no one's surprise, the Bank of Canada left its target overnight rate unchanged at 1/2 percent. The Bank, however, reduced its forecast for the global economy and for the U.S. economy as well, suggesting that the outlook for Canadian exports is less favorable than earlier forecast. (Table 1 below shows the Bank's current global forecasts with the January fo recasts in parentheses.)

While oil prices are off their lows and slightly above the level forecast by the Bank in January, the central bank now expects deeper cuts in oil sector business investment. The Bank expects crude oil prices to remain low (Chart 2). The Canadian dollar has increased sharply from its lows earlier this year, "reflecting shifting expectations for monetary policy in Canada and the United States, as well as recent increases in commodity prices." The loonie has surged 15% in less than three months to its strongest level in since mid-2015. This, of course is bad news for exports, and the Bank played down the outlook for Canadian growth in its policy statement and Monetary Policy Report (MPR).

The Bank suggested the surprising strength in the first quarter is in part due to temporary factors and will reverse in the second quarter. Their estimate of output growth in the first quarter is now 2.8%, below consensus private-sector estimates of 3+%, slowing to 1% output growth in the second quarter. The Bank re-emphasized that the structural adjustment to the decline in oil prices is ongoing and will dampen growth over the next three years. This is a more pessimistic, but realistic view than the Bank took a year ago.

The Bank's forecast for growth this year and next is significantly less optimistic than many market watchers expected, especially in light of the recent strengthening in the employment and monthly GDP data. The Bank's Governing Council suggested that had it not been for the recent budget's fiscal stimulus, the growth outlook would have been revised down from the January outlook. Including the effects of the budgetary easing, the Bank now forecasts Canadian growth this year at 1.7%, next year at 2.3% and and 2.0% in 2018. Slower foreign demand growth, the higher Canadian dollar and a downward revision to business investment all have negative impacts on the outlook but are more than offset by the positive effects of the fiscal measures announced in the federal budget in March.

The Bank of Canada also revised down its estimate of potential growth in the economy to roughly 1.5%, mainly reflecting slower growth in trend labour productivity as a result of weaker investment. The new growth profile, combined with the revised estimate for potential, suggests the output gap could close somewhat earlier than the Bank had anticipated in January, likely in the second half of 2017. Inflation is expected to remain at or  below the target rate of 2%.

Bottom Line: Caution is the watchword for today's Bank of Canada policy report.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Canadian Manufacturing Sales

After a strong start to the year and three consecutive months of gains, Canadian manufacturing sales decreased 3.3 per cent in February.  Sales were dragged lower by declines in 16 of 21 industries with most of the fall in sales due to the motor vehicle parts, petroleum and coal products and aerospace industries.

In BC, where the manufacturing sector employs approximately 170,000 people, sales declined 0.6 per cent on a monthly basis and fell 2.2 per cent year-over-year.  Struggling economies in neighboring provinces, a slower than expected first quarter in the United States and the ongoing slowdown in China are all key factors in lower demand for BC manufacturing products. The export and manufacturing sector is the one area of the otherwise strong BC economy that is clearly lagging and that trend is expected to last for much of 2016. However, a pick up in economic growth in the United States following a slow start to the year should boost demand later this year.

Copyright BCREA – Reprinted with permission 

BC Home Sales Post All Time Record

The British Columbia Real Estate Association (BCREA) reports that a record 12,560 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in March, up 38 per cent from March of last year. Home sales last month eclipsed the previous record of 11,683 unit sales in May of 2007. Total sales dollar volume was $9.69 billion in March, up 66.9 per cent compared to the previous year. The average MLS® residential price in the province was up 20.2 per cent year-over-year, to $771,620.

“Housing demand has never been stronger in the province,” said Cameron Muir, BCREA Chief Economist. “Most large population centres of the province are now experiencing record levels of housing demand.“

“Strong employment growth, rising wages and a marked increase in net inter-provincial migration is fueling consumer confidence,” added Muir.

Supply imbalances are becoming increasingly common as new residential listings are not keeping pace with consumer demand. As a result, the inventory of homes for sale is at decade-long lows in many regions.

The year-to-date, BC residential sales dollar volume increased 70.1 per cent to $21.59 billion, when compared with the same period in 2015. Residential unit sales climbed by 39.2 per cent to 28,028 units, while the average MLS® residential price was up 22.2 per cent to $770,408.

Copyright BCREA – Reprinted with permission 

Bank of Canada Interest Rate Announcement

The Bank of Canada announced this morning that it is maintaining its overnight rate at 0.5 per cent. In the press release accompanying the decision, the Bank noted that although first quarter GDP growth appears unexpectedly strong, it believes that strength is temporary and will likely reverse in the second quarter. However, fiscal measures announced in the March federal budget are anticipated to have a notable positive impact on growth. The Bank is now forecasting that the economy will grow 1.7 per cent this year, 2.3 per cent next year and 2 per cent in 2018. That upgrade to growth means the output gap will close sooner than expected, likely in the second half of 2017.  That suggests a return to the Bank's 2 per cent target for inflation along the same time-line.  Overall, the Bank judges risk in the economy as roughly balanced. Interestingly, the Bank did not highlight the housing sector as a risk despite frenzied activity in both Vancouver and Toronto.

A significantly upgraded economic forecast will very likely close the door on further discussion of an impending rate cut, though downside risks in the global economy remain.  Indeed, as the economy accelerates and the output gap closes, we expect the Bank to move to a tightening bias. However, the Bank in unlikely to offset the fiscal stimulus provided by the budget and so an increase in interest rates is still some time away. If economic growth and job creation continue to surprise to the upside, it is possible that the Bank will begin raising rates in late 2017 and we could potentially see a modest rise in mortgage rates toward the end of this year in anticipation of tighter monetary policy.

Copyright BCREA – Reprinted with permission 

Canadian Employment

Employment in Canada surged higher in March after three months of flat job growth. Total employment increased by 41,000 jobs and the national unemployment dropped 0.2 points to 7.1 per cent.  Total hours worked, which is closely associated with economic growth, increased by 1.2 per cent.

Employment in BC grew by 9,000 jobs in March, including 5,500 full-time jobs. The provincial unemployment rate declined 0.1 points to 6.5 per cent. Over the past 12 months, the BC economy has added 72,000 jobs while growing total employment at a 3.2 per cent rate, the fastest rate of growth among all provinces.

Copyright BCREA – Reprinted with permission 

Canadian Building Permits

The total value of Canadian building permits climbed 15.5 per cent on a monthly basis in February. That increase follows a 9.5 per cent decline in the previous month. Stronger permits were driven by higher construction intentions in the commercial sector in Alberta as well as single-family residential permits in Ontario. 

In BC, total permit activity declined in February, dropping 1.2 per cent on a monthly basis but remained above $1 billion for the fourth consecutive month. On a year-over-year basis, the dollar value of building permits in the province was 11.5 per cent higher than February 2015. Non-residential permits were up 17.1 per cent on a monthly basis and close to 54 per cent year-over-year while residential permits were down 8.3 per cent on a monthly basis and were 1.8 per cent lower compared to last year. 

Construction intentions were mostly lower in BC's four census metropolitan areas (CMA). Permits in the Abbotsford-Mission CMA were down 43 per cent on a monthly basis and 13.8 per cent lower year-over-year.  In the Kelowna CMA, permits fell 63 per cent from January but were 65 per cent lower year-over-year. In the Vancouver CMA, permits fell 5.5 per cent on a monthly basis and were essentially flat year-over-year.  In the Victoria CMA, permit activity was up 94 per cent on a monthly basis and more than doubled on a year-over-year basis.

Copyright BCREA - reprinted with permission 

Canadian Monthly GDP

The Canadian economy got off to a fast start in 2016 as real GDP expanded 0.6 per cent in the month of January, the fourth consecutive monthly increase. Output was led higher by gains in the manufacturing, oil and gas extraction, retail trade and finance industries. Given the strong start to the quarter, economic growth is tracking at a more than 3 per cent rate for the first quarter.

The Canadian economy grew just over 1 per cent for all of 2015 and so the strong start to the year is a welcome turn of events. However, with oil and other commodity prices still low, it is too early to say whether 2016 will see continued strong growth. That said, we do anticipate a stronger economy this year, helped along by a strengthening US economy, a low dollar and fiscal stimulus that should start having an effect during the second half of 2016. 

Copyright BCREA - reprinted with permission 

US Employment

US Non-farm payrolls increased for a record 73rd consecutive month in March, rising by 215,000 jobs.  The US unemployment rate edged slightly higher to 5 per cent.  Over the past three months, the US economy added an average of 209,000 jobs per month. 

The US economy is steadily growing and producing jobs at a good but not spectacular pace. Wage growth is low but seems to be increasing and inflation remains muted. All in all, there is still not much of a case of more aggressive tightening by the US Federal Reserve which should help keep Canadian bond yields and therefore mortgage rates low.

Copyright BCREA - reprinted with permission