Kootenay Connector Real Estate Blog

Monday, June 8, 2015

Canadian and US Employment

Canadian employment surged by 59,000 jobs in May, though the national unemployment was unchanged at 6.8 per cent. Total hours worked, which is strongly correlated with economic growth, increased 1.2 per cent compared to May 2014. Since the beginning of the year, employment growth has averaged a fairly strong 20,500 jobs per month but with significant month-to-month volatility.

In BC, employment grew by 30,600 jobs in May, following a similar magnitude of job losses in April. The majority of the gains came in part-time employment, though full-time work grew by a robust 9,600 jobs. The provincial unemployment was ticked 0.2 points lower to 6.1 per cent.

In the United States, payrolls expanded by 280,000 jobs in May while the unemployment rate ticked up 0.1 points to 5.5 per cent. Over the past three months, US job growth has trended at a very healthy 207,000 per month.

Canadian Housing Starts

New home construction in Canada jumped 10 per cent in May to 201,705 units at a seasonally adjusted annual rate (SAAR). The six-month trend in Canadian housing starts of 181,231 units SAAR was up slightly and is in-line with Canadian household growth.

Housing starts in BC fell from a blockbuster 37,000 units in April to 25,609 units SAAR in May. On a year-over-year basis, housing starts were down 11 per cent compared to May 2014. Single-detached starts were 8 per cent higher while multiple unit starts fell 20 per cent compared to this time last year. Year-to-date, housing starts in BC are up 13 per cent.

Looking at census metropolitan areas (CMA) in BC, total starts in the Vancouver CMA were down 13 per cent year-over-year in May due to a 17 per cent decline in multiple starts. Single-detached starts in Vancouver were 3 per cent higher. In the Victoria CMA, new home construction fell 32 per cent year-over-year due to a 44 per cent drop in multiple unit starts. Total housing starts in the Kelowna CMA were down 36 per cent year-over-year in May with broadly weaker construction activity of both single and multiple units. Housing starts in the Abbotsford-Mission CMA declined by just over half compared to May 2014 .

Monday, June 1, 2015

BC Housing Demand Forecast to be Strongest Since 2007

BCREA 2015 Second Quarter Housing Forecast

The British Columbia Real Estate Association (BCREA) released its 2015 Second Quarter Housing Forecast today.

“More robust economic growth, strong consumer confidence and rock-bottom mortgage interest rates are expected to push housing demand this year to its highest level since 2007,” said Cameron Muir, BCREA Chief Economist.

Multiple Listing Service® (MLS®) residential sales in British Columbia are forecast to rise 12.1 per cent to 94,300 units this year, before edging back 2.9 per cent to 91,600 units in 2015. The ten-year average is 83,600 unit sales. A record 106,300 MLS® residential sales were recorded in 2005.

Stronger consumer demand combined with fewer homes available for sale is forecast to push the average MLS® residential sales price in the province up 7.4 per cent to $610,500 this year. Modest upward pressure on mortgage interest and rising new home completions are expected to ease pressure on home prices in 2016. The average MLS® residential sales price is forecast to increase by 1.7 per cent to $621,000 in 2016.

Canadian Economic Growth (Q1)

Growth in the Canadian economy was modestly worse than expected in the first quarter of 2015 with real GDP contracting at an annualized rate of 0.6 per cent. This was the first negative quarter for the economy since the second quarter of 2011. Household consumption was dragged down by lower incomes in oil-producing provinces and posted the smallest quarterly gain in three years at just 0.1 per cent. An oil-led second consecutive quarterly decline in exports, declining business investment and a fall in government spending were more than enough to offset meager gains in consumption spending to tip economic growth into negative territory.

Most economists, including the Bank of Canada, anticipate that the negative impact of the collapse in oil prices will be largely contained in the first quarter and that growth will recover from the second quarter onward. The Banks choice to hold its overnight rate steady at its meeting earlier this week is a good indication that they do not see a further deterioration in the economy going forward. We expect that economic growth will accelerate from here, likely in a range of 2 to 2.5 per cent at a annualized rate for the remainder of the year.

Bank of Canada Interest Rate Announcement

The Bank of Canada announced this morning that it is maintaining its target for the overnight rate at 0.75 per cent. In the press release accompanying the decision, the Bank noted that inflation in Canada continues to evolve as forecast with core inflation boosted by a lower dollar while CPI inflation remains near the bottom of the Bank's 1-3 per cent control range due to the transitory effects of lower energy prices. The Bank sees the underlying trend of inflation at 1.6 to 1.8 per cent, which is consistent with persistent slack in the economy. The Bank's outlook for economic growth remains largely unchanged from its previous forecast with expectation of a solid recovery beginning in the second quarter.

With oil prices stabilizing and core inflation firming around its 2 per cent target, a further loosening of monetary policy is becoming more unlikely. If growth recovers as the Bank forecasts over the next couple of quarters, attention will shift once again to the timing of future rate increases. While we do not expect the Bank to act on interest rates for the remainder of the year, long-term bond yields and therefore mortgage rates are likely to rise from their current lows as growth improves and the US Federal Reserve begins raising its own target rate later this year.

Canadian Manufacturing Sales

Canadian manufacturing sales rose 2.9 per cent in March, the second increase in the last six months. Sales were led by an increase in aerospace products and motor vehicles while fabricated metal products declined. In total, 10 of 21 sub-sectors saw increased sales in March.

In BC, where manufacturing employs close to 170,000 people, manufacturing sales fell 2.2 cent on a monthly basis in March, but were 8.1 per cent higher year-over-year. Through the first quarter of 2015, BC manufacturing sales are up 7.6 per cent which has helped push economic growth in the province higher. Growth in the BC economy is currently tracking at 2.5 per cent through the first three months of the year, but as growth in the US and other parts of Canada picks-up in the second half, we expect manufacturing and trade to lead a further acceleration of growth in the province.

Hottest April for Home Sales in a Decade

The British Columbia Real Estate Association (BCREA) reports that a total of 9,952 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in May, up 28.7 per cent from the same month last year. Total sales dollar volume was $6.3 billion, a 45.5 per cent increase in comparison to the previous year. The average MLS® residential price in the province rose to $634,744, a 13 per cent increase since last May.

“Last month was the strongest April for home sales in a decade,” said Cameron Muir, BCREA Chief Economist. “The elevated level of buying activity this spring is now expected to push 2015 home sales to their highest level since 2007.”

“Consumers are taking full advantage of rock bottom interest rates and are demonstrating significant confidence in the housing market,” added Muir. “However, dwindling inventories combined with competition for detached homes in the province`s large urban markets is pushing home prices higher.”

During the first four months of 2015, BC residential

sales dollar volume rose 37.1 per cent to $19 billion, when compared with the same period in 2014. Residential unit sales increased by 24.5 per cent to 30,091 units, while the average MLS® residential price rose 10.1 per cent to $631,860.

Canadian and US Employment

Canadian employment declined by 20,000 jobs in April while the national unemployment rate remained at 6.8 per cent. Total hours worked, which is strongly correlated with economic growth, increased 0.9 per cent compared to April 2014. At the provincial level, employment fell in BC, Ontario and Nova Scotia and rose in Alberta and Newfoundland.

In BC, employment declined by a dramatic 28,700 jobs in April with full-time employment suffering a loss of 17,500 while part-time employment was down 11,300. The provincial unemployment rate rose 0.5 points to 6.3 per cent. April's job losses were the worst on record dating back to 1976 and topping the previous record of 23,700 jobs lost in June 2001. Given that other measures of provincial employment and consumer demand remain quite strong, we would view this report as an anomaly that will likely correct in coming months.

Employment in the US recovered from weak job creation in March, rising by 223,000 in April while the unemployment rate declined to 5.4 per cent. The average monthly rate of job growth in the US over the past three months stands at a healthy 191,000.

Canadian Building Permits

The total value of Canadian building permits rose close to 12 per cent on a monthly basis in March, led by higher construction intentions in the non-residential sector in BC and Alberta as well as higher permits for multi-family dwellings in BC and Ontario.

The value of building permits issued in BC rose for a second consecutive month, climbing 52.6 per cent on a monthly basis and 63.5 per cent year-over-year. Non-residential permits in BC more than doubled on a monthly basis in March due in large part to a surge of commercial permits in the Vancouver CMA. The value of permits in the residential sector increased 28.7 per cent in March on a monthly basis and were 68.5 per cent higher year-over-year. Residential permits were led by an 11 year high in permits for multi-family units.

Construction intentions were up in all four of BC's census metropolitan areas (CMA). Permits in the Abbotsford-Mission CMA increased 52.1 per cent on a monthly basis but were 12.4 per cent lower year-over-year. In the Kelowna CMA, permits jumped 153 per cent from February and were 84.2 per cent higher year-over-year. In the Victoria CMA, permit activity was up 31.8 per cent on a monthly basis but was 4 per cent lower year-over-year. In the Vancouver CMA, permits increased for a second month in a row, rising 59.5 cent on a monthly basis and 97.2 per cent year-over-year

Canadian Monthly GDP

Canadian real GDP was unchanged in February, following a modest contraction in January. Continued weakness in the oil and gas sector was offset by a rebound in retail trade.

While the Canadian economy has clearly decelerated in recent months, February's GDP numbers were actually better than most expected. Given all available data for the first quarter, the Canadian economy is tracking close to zero per cent growth in real GDP. If the Bank of Canada is correct that most of the impact of lower oil prices will occur in the first quarter of 2015, we should see a gradual rebound in growth soon. If so, that likely puts any further loosening of monetary policy on hold.