Canadian Retail Sales

Canadian retail sales edged 0.1 per cent higher in September, following increases in the previous two months. Retail sales were higher in 7 of 11 retail sub-sectors. Adjusted for inflation, retail sales were flat.

Third quarter Canadian economic growth has looked consistently weak and today's positive retail sales data does little to move our GDP tracking estimate. We estimate that the Canadian economy grew by just 0.8 per cent in the third quarter. However, we do expect growth to rebound to close to 2 per cent in the fourth quarter.

Retail sales in British Columbia were up 0.3 per cent in September and 0.8 per cent higher year-over-year. Through the third quarter, retail sales have grown 3.2 per cent over last year.

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Consumer Price Index

Canadian consumer price inflation was tame in October, registering just 1.2 per cent year-over-year.  The Bank of Canada's core inflation index, which excludes the eight most volatile components of the CPI like energy and food, rose 1.3 per cent in October, matching the rate from September.  Inflation in BC fell to just 0.5 per cent year-over-year.

Very low core inflation suggests that the Canadian economy is still operating with a substantial amount of excess supply. So, in spite of a clear tightening bias, inflation running near the bottom of the Bank of Canada's target control range suggests that rising interest rates remain far off on the horizon.

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Canadian resale housing activity stable in October

According to statistics released today by The Canadian Real Estate Association (CREA), national home sales activity and average price were little changed in October 2012.

Highlights:

Home sales little changed (-0.1%) from September to October.

Actual (not seasonally adjusted) activity down 0.8% from October 2011.

Number of newly listed homes down 3.8% from September to October.

Market remains firmly in balanced territory.

National average home price unchanged (+0.02%) on a year-over-year basis.

MLS® HPI up 3.6% in October – smallest gain since May 2011.

 The number of home sales processed through the MLS® Systems of Canadian real estate Boards and Associations was little changed in October 2012 compared to the previous month (-0.1 per cent) and remains below levels reported in the first half of the year.

Sales activity improved in about half of all local markets as compared to September, including Greater Vancouver and Greater Toronto. However, in keeping with the national trend, transactions there remain well below levels posted in the first half of the year.

On a year-over-year basis, actual (not seasonally adjusted) activity was also little changed, down 0.8 per cent from levels recorded for October of last year. Led by Calgary, sales were up compared to levels one year ago in almost two-thirds of all local markets. Sales remained below year-ago levels in Greater Toronto, Greater Vancouver, and Greater Montreal.

“Sales data in October held steady at the national level, but we are seeing some diverging trends among local housing markets,” said CREA President Wayne Moen. “Markets in Alberta and Saskatchewan are gaining strength, while some of Canada’s traditionally most active markets have lost steam. As always, all real estate is local, so buyers and sellers should talk to their REALTOR® to understand how the housing market is shaping up where they live or might like to live.”

“Little has changed since national activity geared down in the wake of mortgage rules that came into force in July,” said Gregory Klump, CREA’s Chief Economist. “Opinions differ about how sharply sales have slowed depending on the local housing market.”

National sales in October were on par with the same month last year and in line with the 10-year average for the month.  Activity for the year-to-date is also running in line with the 10 year average.

"These results suggest that the Canadian housing market overall has returned to a more sustainable pace,” added Klump.

A total of 402,322 homes have traded hands via Canadian MLS® Systems over the first 10 months of 2012, up 0.8 per cent from levels reported over the same period last year and 0.4 per cent below the 10-year average for the period.

The number of newly listed homes retreated by 3.8 per cent in October following a jump in September. Monthly declines were reported in almost two-thirds of all local markets, with Greater Toronto and Greater Vancouver exerting a large influence on the national trend.

The monthly decline in new listings caused the national sales-to-new listings ratio to edge back up to 50.9 per cent in October compared to September’s reading of 49 per cent. Based on a sales-to-new listings ratio of between 40 to 60 per cent, nearly two-thirds of all local markets were in balanced market territory in October.

The number of months of inventory is another important measure of the 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. It was another measure that was little changed in October. Nationally, there were 6.5 months of inventory at the end of October. This is virtually unchanged from the reading of 6.4 months at the end of September after accounting for rounding (6.479 in October vs. 6.448 in September).

The actual (not seasonally adjusted) national average price for homes sold in October 2012 was $361,516. This represents an increase of $80, or 0.02 per cent compared to the national average price in October 2011.

The national average price continues to be influenced by compositional factors, most notably by fewer sales in Greater Vancouver this year compared to much stronger levels last year, and more recently by fewer sales in Greater Toronto.

Excluding these two markets from the national average price calculation yields a year-over-year increase of 2.5 per cent, reflecting average sale prices that rose in 70 per cent of all local markets in October 2012.

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 3.6 per cent on a year-over-year basis in October. This marks the sixth consecutive month in which the price gain slowed and is the slowest rate of increase since May 2011.

Year-over-year price gains decelerated for all Benchmark property types tracked by the index with the exception of the townhouse/row segment. The townhouse/row segment nonetheless posted the slowest price growth among Benchmark properties.

Year-over-year price growth remains strongest for one-storey single family homes (+5.3 per cent) and two-storey single family homes (+4.5 per cent). Prices for townhouse and apartment units continue to post more modest gains, rising 1.2 per cent and 1.5 per cent respectively.

Most markets continued to see positive but slowing year-over-year price growth in October. The exceptions were Calgary, where price growth accelerated, and Greater Vancouver, where the year-over-year price decline was smaller in October than it was in September.

The MLS® HPI rose fastest in Regina (13.0 per cent year-over-year), but the increase was smaller than it was in September (14.2 per cent).

The MLS® HPI also climbed in Calgary (6.8%), Greater Toronto (5.1%), Greater Montreal (1.8%), and the Fraser Valley (1.5%). In Greater Vancouver, the MLS® HPI eased 0.8 per cent year-over-year in October.

 

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US Housing Starts

US housing starts rose to a four-year high in October, increasing 3.6 per cent month-over-month to a seasonally adjusted annual rate (SAAR) of 894,000. Building permit data, a proxy for future housing starts, declined slightly but was still strong at 866,000 (SAAR), suggesting that the recovery in the US homebuilding sector will be sustained.

A pick-up in US new home construction seems to already be stimulating increased shipments of BC wood products. The uptick in housing starts this year, and especially the acceleration of construction activity in the third quarter, has coincided with a 25 cent year-over-year increase in BC softwood lumber exports and a 27 per cent increase in all housing related wood product exports to the United States through the end of the third quarter.

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Housing Market Update (November 2012)

 

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BC Home Sales Continue at Moderate Pace

The British Columbia Real Estate Association (BCREA) reports that the dollar volume of homes sold through the Multiple Listing Service® (MLS®) in BC declined 14.6 per cent to $2.7 billion in October compared to the same month last year. A total of 5,276 MLS® residential unit sales were recorded over the same period, down 10 per cent from October 2011. The average MLS® residential price was $508,292, down 5.1 per cent from a year ago.

"While consumer demand was stronger in October on a provincial basis, home sales continue to trend below last year’s level,” said Cameron Muir, BCREA Chief Economist. “Tighter mortgage credit regulation has moderated housing demand on the South Coast."

 

“However, an increase in residential sales was recorded in the Okanagan, Kootenay, Chilliwack and BC Northern board areas,” added Muir.

 

Year-to-date, BC residential sales dollar volume declined 18.2 per cent to $31.1 billion, compared to the same period last year. Residential unit sales declined 10.5 per cent to 59,946 units, while the average MLS® residential price was 8.6 per cent lower at $518,321.

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Canadian Housing Starts

Canadian housing starts declined to 204,107 units at a seasonally adjusted annual rate (SAAR) in October, down from September's 223,995 units.  New home construction in BC urban centres was essentially flat in October at  26,788 units (SAAR) compared to 27,184 in September.  On a year-over-year basis, multiple unit starts in BC were unchanged while single family starts were 6 per cent lower. Overall,  BC housing starts were 2 per cent lower than in October 2011.

Looking at major metropolitan areas in BC, Vancouver starts increased 3 per cent year over year in October. The increase was driven by an 8 per cent rise in multiple starts. Vancouver single starts fell 16 per cent year-over-year. New home construction in Abbotsford was off 71 per cent compared to 2011 due to relative inactivity in multiple starts this October compared to last. Abbotsford singles were 6 per cent lower than last year. Housing starts in Kelowna dipped 8 per cent year- over-year due to a slower pace multiple starts while single starts increased 8 per cent.  Housing starts in Victoria fell 26 per cent compared to October 2011 as multiple unit starts fell short of 2011 levels. Victoria single starts were up 4 per cent year-over-year. quarter of 2012, total starts in Victoria are 1 per cent higher than last year.

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Canadian Building Permits

Canadian building permits fell 13.5 per cent in September following a 9.5 per cent rise in August. The decline in permits was primarily driven by a drop in  non-residential permitting activity. Construction intentions in BC jumped 14.5 per cent in September, leading all provinces. The total dollar volume of permits exceeded $1 billion for the second time in the past three months, led by continued strength in non-residential permitting activity, which jumped 44 per cent month-over-month and 163 per cent year-over-year. September residential permits were 4 per cent lower compared to August, but were 14 per cent higher than September 2011.

Permit activity was markedly higher in three of BC's four major metropolitan areas.  Vancouver saw total permits increase 21 per cent month-over-month and 81 per cent year-over-year in September. Abbotsford permits tripled from August levels and were more than doubled year-over-year.  Victoria recorded an 81 per cent increase over August and 45 per cent compared to September 2011.  In contrast, Kelowna saw construction intentions sag, with permits falling 50 per cent month-over-month and 33 per cent year-over-year.

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Canadian home sales remain at lower levels in September

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Canadian Labour Force Survey and United States Non-Farm Payrolls

Following two months of increases, Canadian job growth was virtually unchanged in October as small increases in full-time employment were mostly offset by losses in part-time employment.  The Canadian unemployment rate held steady at 7.4 per cent.

The BC labour market took a step back in October as employment declined by almost 11,000 jobs. BC firms shed 16,200 full-time jobs which were partially offset by a small increase in part-time employment. Job losses were concentrated in the manufacturing and health care sectors while gains were realized in the construction, finance, insurance and real estate and information and cultural sectors.  In spite of net job losses, the BC unemployment rate actually declined 0.3 points to 6.7 per cent due to a significant decrease in the labour force.

In the United States, job growth beat expectations as 171,000 workers were added to payrolls in October while September jobs numbers were revised substantially higher.  The US unemployment rate ticked 0.1 points higher to 7.9 per cent as recent job growth has encouraged more people to enter the labour force.

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