Housing data paint a mixed picture
By Peter Diekmeyer • Bankrate.com
While recent residential real estate indicators are almost all pointing south, the picture here has been more nuanced. For
example Canadian resale housing activity fell during February, yet housing starts increased.
The price data isn't much clearer: the cost of new housing in Canada has accelerated while sale prices of existing homes
registered their smallest increase in more than three years. The big question for housing sector stakeholders is what this contradictory
information means. Will Canada's red-hot housing market finally cool down, as many observers have expected?
One long-time industry watcher says yes. "Canadian
home sales are now firmly below year ago levels, another sign that
the Great White North's housing boom is grinding to a finish," says
Douglas Porter, an economist with BMO Capital markets. "Dismal weather
may have exaggerated the weakness in the opening months of the year,
but there are more durable factors to suggest the bloom is off the
boom."
Sales down, starts up, affordability slips
Existing homes sale statistics suggest that Porter may be right.
According to the Canadian
Real Estate Association, or CREA, the number of homes sold in
major markets via its Multiple
Listing Service, or MLS, fell 6.4 percent during February compared
to the same month last year. Furthermore, the average selling price
of those new homes increased by just 5.3 percent on a year-over-year
basis to $327,477, the smallest jump since November 2004.
On the other hand, housing starts increased to a seasonally adjusted rate of 256,900 units in February from 227,700 units the
previous month. That said, this increase is far less impressive when you consider the fact that much of the jump is related to condominium
starts, which tend to generate less economic activity than single-family-home starts.
The increase in new home starts may have been motivated in part by the prices builders are getting for the homes that they
are putting up. According to Statistics Canada, during January, the cost of new housing accelerated for the second consecutive month. The
prices that contractors charge for new homes increased 6.5 percent during that month compared to January 2007. That jump, as well as the 6.2
percent gain in December, marked the end of 16 straight months during which gains in new housing prices had been coming down.
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