We are seeing similar signs in the Vancouver real estate market and many are now saying that the price adjustments may have bottomed out sometime towards the end of 2008 or the first couple of months of 2009. And in fact we may have seen prices of Vancouver real estate bounce back a bit from their lows earlier this year.

New home construction rose for a second straight month in June, in what analysts say is another sign that the worst may be over for the Canadian housing market.
Canada Mortgage and Housing Corp. said Thursday there were 140,700 new homes constructed in June on a seasonally adjusted annualized basis. Construction was up almost 8% from the 130,300 May figure.
“There are some pretty good signs that we are starting to see in the housing market,” said Bob Dugan, chief economist with CMHC. “We’ve seen it for quite a few months on the existing homes side.”
Existing home sales rose 42% from January to May across the country and the early indications are that June was strongest month this year. Sales in Vancouver were up 76% last month compared with a year earlier and Calgary and Toronto both recorded 27% increases during the same period.
Existing home inventories have begun to shrink across the country, convincing builders to ramp up construction. CMHC said urban single family homes — considered the best barometer of the new home market — climbed 7.3% in May from a month earlier.
“It’s well into seller’s market territory again with the May and April numbers,” said Mr. Dugan.
The optimism about the Canadian market comes despite the fact new construction at 140,000 units is way off the 200,000-plus figure the market in Canada has seen for the past seven years.
“I can only speculate, but maybe a lot of people are relieved we are not seeing the decreases we have seen in the U.S.,” said Mr. Dugan. “Peak-to-trough, the decline in the U.S. was something like 80%. In Canada, that would mean we’d have to have 55,000 starts. Some people may have thought that’s where the Canadian market was going.”
The consensus among economist is construction won’t return to pre-recession levels but will gradually improve in the coming months.
“This month’s increase is an important confirmation that the Canadian housing sector is past the worst and in recovery mode,” said Marco Lettieri, an economist with National Bank. “The recovery seems to be broad based with gains observed in both multiple [which includes condominium construction] and single units.”
Robert Kavcic, an economist with Bank of Montreal, said there could be some room for modest growth in starts in the coming months.
“Higher affordability and improved consumer confidence brought buyers off the sidelines this spring,” said Mr. Kavcic.
A report this week from RBC Economics said declining prices and lower interest rates led to one of the biggest quarterly improvements in affordability in history. The bank said monthly payments on a typical detached bungalow in Canada had decreased by almost 17% from a year earlier.
Royal LePage Real Estate Services was also forced this week to upgrade its forecast for 2009 because of the improved market conditions. It now expects 430,000 sales this year, an improvement from its previous call of 416,000, but still down 1% from a year ago.
“I think 2009 will go down as a moderate correction as opposed to the deep and sustained recession that we had first feared,” said Phil Soper, chief executive of the real estate company.
Royal LePage expects prices this year will still fall but not by as much as previously feared. It expects the average sale price in 2009 to be $297,000, a 2% drop from last year. It had previously forecast a 3.5% decline.
Mr. Soper said a decline is still tough to swallow after years of compound growth of close to 10% in the housing market but it’s proving to be a far cry from what has happened in the United States.
“We are long way from the 35% decline that a lot of regions in the United States are experiencing. It’s a very different kind of correction,” said Mr. Soper

http://bestmortgagesvancouver.wordpress.com/2009/07/16/worst-may-be-over-for-the-housing-market/

reviewed by Moishe Alexander, CFC  canadian funding corp CEO

Stephen Gordon – National Post

Here is part of what is hopefully one of the last of a once-robust breed – The Apocalyptic Canadian Housing Market Story, this one from Macleans:

Judging by the latest real estate data, the Canadian housing market could scarcely be better. Average home prices are up more than 16 per cent this year, and in May they hit an all-time monthly high, according to the Canadian Real Estate Association. By those numbers, Canada didn’t just sidestep the housing market crash that continues to plague the United States, it sailed right through it virtually unscathed. And yet, there are plenty of signs that the Canadian housing market is still sitting on some very shaky ground—and even the potential that Canada’s big housing crash is yet to come.

Yadda yadda yadda.

We all know that the proximate cause of the U.S. recession was the bursting of its housing market bubble: it blew up banks, laid waste to personal balance sheets, and left millions of people stuck in homes whose mortgages were more than their market value.

And then Canada went into recession. Unfortunately, this set up the following error of logic that was repeated in all-too-many Canadian newsrooms:

1. The U.S. is in recession because its housing market blew up.

2. Canada is in recession.

3. Therefore, Canada’s housing market must be blowing up as well.

And so it was the fate of any number of hapless Canadian journalists to be given assignments to bash out pieces that fit this narrative. But these exercises were all doomed to failure. The decline in house prices in Canada is a symptom of the recession, not its cause.

Let’s look at how house prices have behaved since 2003:

Canadian and US price indices

U.S. house prices have fallen almost 40% (all changes are expressed in per cent log terms: 100 times the difference in the logs), while Canadian house prices are still within 10% of their peak. There are any number of lazy analysts who have swallowed the faulty syllogism enumerated above and have concluded that ‘Canada is following the U.S. with a lag’. This only makes sense if you think that Canadian house prices rose for the same reasons that US prices rose, and that they have fallen for the same reasons that U.S. prices have fallen. This is not the case. As has been documented at great length here and elsewhere, the Canadian economy has avoided the worst of the bubble and its consequences for the following reasons (among others):

1. We never had restrictions on interstate banking, so Canadian banks spread their assets and liabilities across Canada. (So it doesn’t matter if a local housing market goes bust).

2. We don’t have Glass-Steagal. The investment banks joined the retail banks some years ago.

3. We don’t have mortgage interest deductibility from taxes. So paying down your mortgage is a tax-free investment. So most people want to pay down their mortgages.

4. (Except in Alberta), mortgages are fully recourse. You can’t just walk away from a negative equity home and hand the keys to the bank; the bank will come after you for the difference.

Yes, house prices have fallen. But the linkages that make the U.S. story so compelling don’t exist here. We don’t have banks that are blowing up. We don’t have massive waves of foreclosures (even the Globe and Mail has given up on its series of articles that culminated in this silliness). Nor do we have much in the way of evidence that lower house prices are causing undue inconvenience to Canadians: when Maclean’s decided to jump on the OMGWTFBBQ housing market bandwagon, the best it could could come up with in the way of a victim was some flipper of 7-figure Vancouver condos who got caught mid-flip. Boo-hoo-freaking-hoo.

Moreover, it’s becoming pretty clear that the decline in house prices is not so much a national story as it is one of falling house prices in Vancouver, Calgary and Toronto:

Canadian city house price indices

Vancouver is and always will be a special case whenever we talk about housing prices in Canada: its geography makes it extremely difficult for developers to respond to increases in demand. This is the sort of environment in which bubbles flourish so I’m not going to pretend that I can predict movements in Vancouver house prices. In Calgary, the incipient recovery in the oil sector will no doubt establish a floor on housing prices there fairly soon. And there’s even not-entirely-bad news out of Toronto these days. So I don’t see just how the national index is supposed to fall by another 30% or so.

It’s worth following the housing market numbers. But they are going to be at best a coincident indicator in this cycle.

Stephen Gordon is a professor of economics at l’Université Laval in Quebec City, Canada and a fellow of the Centre interuniversitaire sur le risque, les politiques économiques et l’emploi. He is co-author of the blog site, Worthwhile Canadian Initiative.

http://www.jeffreyteam.com/blog/toronto-real-estate-market/the-oversold-story-of-the-canadian-recession/

brought  by Moishe Alexander, CFC  canadian funding corp CEO

More than half a million Canadians have fallen behind on their various credit payments, fuelling a 19 per cent rise in the average national delinquency rate in the one-year period ending May 31, 2009, says a new report from Equifax Canada.

The credit bureau called the double-digit jump “alarming,” noting the average delinquency rate for Canada hit 1.52 per cent at the end of May.

Much of the trouble stemmed from missed payments on credit card bills and for sales finance purchases of items such as furniture and electronics.

Equifax defines delinquent bills as those that are at least 90 days overdue.

Nadim Abdo, an Equifax vice-president, stressed the “sharpest increase” in delinquencies resulted from credit card and sales finance purchases, which have risen by 38 per cent and 58 per cent, respectively, since May 2008.

Rising delinquencies in those areas are troubling because consumers tend to miss payments on those unsecured credit products before they fail to pay back collateral-backed loans such as mortgages, bank loans and lines of credit, Abdo said.

US Credit Card Delinquency Rate Jumps 11 Percent

Inquiring minds might be asking for a comparison between Canada and the US. For the answer, please consider 1Q credit card delinquency rate jumps 11 percent.

Credit card holders who in ordinary years might have used their tax refunds to pay down their balances apparently spent the money elsewhere as the recession deepened in the first quarter.

That’s one of the conclusions that may be drawn from data showing the delinquency rate for bank-issued credit cards rose 11 percent in the first three months of the year, according to credit reporting agency TransUnion.

The delinquency rate jumped to 1.32 percent this year, from 1.19 percent in the first three months of 2008, TransUnion said. The statistic measures the percentage of card holders who are three months or more past due on their payments for cards bearing MasterCard and Visa logos, along with American Express and Discover cards.

The average total debt on bank cards also rose, jumping to $5,776 from $5,548 last year.

TransUnion measures credit card delinquencies at 90 days, but tracks mortgage delinquencies at 60 days. Becker said that is because card payments are typically much smaller than mortgage payments, and it’s easier to catch up on past due cards. For people in financial distress, it’s much harder to produce two mortgage payments once they fall behind, he explained.

Not surprisingly, bank card delinquency rates remained the highest in the states hardest hit by the mortgage meltdown: Nevada, Florida, Arizona and California.

North and South Dakota and Alaska, the states with the lowest rate of mortgage delinquencies, are also the states with the lowest credit card delinquencies, TransUnion data showed.

TransUnion, which samples 27 million consumer records to produce its data, expects the rate of credit card delinquencies to rise for the rest of the year, ultimately reaching about 1.7 percent.

Note that the US rate was a comparison of March 2009 to March 2008 while the rate for Canada was a comparison of May 2009 to May 2008. Thus Canada and the US are following a similar path.

Dynamic Maps

The Federal Reserve Bank of New York has Dynamic Maps of Bank Card and Mortgage Delinquencies in the United States that some may wish to consider.

In regards to mortgages, Canada has some “catching down” to do, and it will. All the bubble areas such as Vancouver, Calgary, Toronto, etc are going to get hit hard.

Mike “Mish” Shedlock

http://globaleconomicanalysis.blogspot.com

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Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

http://offshoreinn.com/investing/500000-canadians-90-days-behind-on-credit-payments-delinquency-rate-hits-152-us-delinquency-rate-is-132/

reviewed by Moishe Alexander, CFC CEO

According to statistics released by The Canadian Real Estate Association (CREA), actual (not seasonally adjusted) home sales via the Multiple Listing Service® (MLS®) of Canadian real estate boards totaled 49,521 units in May 2009. This is less than one per cent below activity in the same month one year ago. Year-over-year declines have been shrinking since the beginning of the year.

The seasonal increase in activity continues to be stronger than normal. As a result, seasonally adjusted home sales rose eight per cent to 37,649 units in May compared to April. This marks the fourth consecutive monthly increase in seasonally adjusted activity. Seasonally adjusted activity in May was 43 per cent above where it stood in January 2009.

Seasonally adjusted sales were up on a monthly basis in about 70 per cent of local markets. Monthly activity gains in Toronto (nine per cent), Calgary (25 per cent), Montreal (10 per cent), Vancouver (eight per cent), and Edmonton (12 per cent) contributed most to the overall increase in monthly activity.

The national MLS® residential average sale price in May 2009 reached the highest monthly level on record. At $319,757, it was up fourth tenths of a percentage point from the previous record set in May 2008. Over the past four months, the national MLS® residential average price has recovered 16.4 per cent from the low in January. The average price for MLS® home sales climbed to new heights nationally, and in Saskatchewan, Ontario, Quebec, New Brunswick, and Nova Scotia. New records were posted in only 15 per cent of local markets in May, none of which are among the most active or expensive. The strong rebound in sales activity, not price, in Canada’s most expensive markets is driving up average prices nationally and in some provinces, just as a sharp decline in activity in these markets pushed average prices lower in late 2008.

The supply of homes coming onto the MLS® market continued to decelerate in May. Seasonally adjusted MLS® residential new listings edged lower by eight tenths of a percentage point to 65,070 units, the lowest level since December 2005. Seasonally adjusted new residential listings in May were 19 per cent below the peak reached one year ago.

With the number of sales rising strongly and new listings trending downward, the balance between supply and demand is firming up in British Columbia, Alberta, Saskatchewan, Ontario, and Quebec. This resulted in national sales activity as a percentage of new listings reaching the highest point since December 2007. Residential dollar volume for MLS® sales climbed 10 per cent from the previous month to reach $11.4 billion in May. This is more than 50 per cent above the low of $7.5 billion reported last January.

“Sales activity is now closer to the pre-recession peak than it is to the recent low point reached last January,” says Regina Broker Dale Ripplinger, President of The Canadian Real Estate Association. “Strengthening consumer confidence, low interest rates, and improved affordability are drawing buyers to the housing market across Canada,” he added.

“Fueled by a string of monthly increases in activity, the number of transactions in May reached the highest point since July 2008,” said CREA Chief Economist Gregory Klump. “Inventory levels are still high in many markets, but fewer new listings and rising sales activity suggests that the selection of homes available for sale may shrink as the year progresses. The supply of homes up for sale needs to be drawn down further before average price increases become more widespread among local markets.”

http://www.muchmormagazine.com/2009/06/national-resale-housing-continues-to-rise/

Only modest house price declines despite predictions of double digit depreciation

Consistent with current economic trends, Canadian residential real estate prices declined during the first quarter, according to a quarterly House Price Survey released today by Royal LePage Real Estate Services Ltd. As the market correction unfolds, year-over-year home prices were lower, as was expected. Increased buyer activity at the end of March suggests that spring will bring its typical increase in unit sales activity as buyers target summer moves.

Regional disparities in quarterly housing prices showed markets in Atlantic Canada outperforming other areas of the country as hardy local economies spurred house price growth across the three housing types surveyed. Markets in central Quebec and eastern Ontario held steady with areas of modest growth and limited declines. In the balance of Ontario, and in particular the Greater Toronto Area, prices retreated from the record levels set in the first quarter of 2008, with most trading areas showing mid to low single digit declines. With the exception of Manitoba, western provinces saw significant changes as the rapid run-up in prices experienced earlier in the decade gave way to double-digit declines in most regions. As market corrections in B.C. and Alberta were underway well ahead of the full impact of the current economic crisis, it is suggested that these areas may be first in Canada to stabilize.

“We expected a sharper decline in house prices across Canadian markets during the first quarter,” said Phil Soper, president and chief executive officer, Royal LePage Real Estate Services Ltd. With economic hardship dominating our global consciousness, it was predictable that dwindling consumer confidence would continue to drive prices lower. But markets were relatively resilient during the period. Soper continued, “Canadians in most regions should not expect the prices of their homes to begin appreciating again until the overall economy begins to stabilize, likely in the first half of 2010.”

The report shows that the average price of a two storey home in Canada declined 6.5 per cent to $379,636 compared to the same quarter last year. In Vancouver, the average price declined 12.6 per cent year-over-year to $828,750 while in St. John’s prices climbed 15.6 per cent to $265,000. With consumer confidence bolstered following investments by Vale Inco NL and Hebron, Soper commented: “Using house price change as a gauge, Newfoundland is Canada’s sole remaining seller’s market.”

Moderate growth occurred for detached bungalows in Montreal (up 2 per cent) and Ottawa (up 1.9 per cent), while Toronto saw a decline of 6.3 per cent compared to the same period in 2008. Prices in the prairies and in western cities declined with the average price for a detached bungalow down 8.1 per cent in Saskatoon and 11.2 per cent in Edmonton.

The nation’s condominium market waned with the average price of a standard unit dropping 4 per cent to $232,877 compared to $241,152 in the first quarter of 2008. Calgary saw a 12.8 per cent drop in average price of condominiums, but declines were less severe in Vancouver (down 5.3 per cent) and in Toronto (down 3.1 per cent). “Condominiums are generally the most affordable housing option, especially in urban centres,” Soper said. “With record low lending rates and new government initiatives aimed at encouraging first-time buyers to enter the market, ownership at the entry level is becoming increasingly accessible.”

Noting recent global efforts to address the economic crisis, including the coordinated response from the world’s leading economies coming out of the G20 meeting and stimulus package announcements at home and in the United States, as well as what appears to be the beginning of equity market recovery, Soper commented, “These glimmers of economic hope are coinciding with a time of year that typically brings renewed interest in the housing market. Traditional spring trends – increases in open house attendance, calls to brokers and viewing appointments – tell us that potential buyers are stepping off the sidelines and an increase in purchase activity is likely to follow.”

Royal LePage’s quarterly House Price Survey shows the following annual change of prices for key housing segments in select national markets. Please click on the link below to open the House Price Survey.

Royal LePage Quarterly House Price Survey April 2009.pdf

In Victoria between January – March 2009 the average price of a Detached Bungalow was $453,000. (3.2% change from 2008)

A standard two-storey home during the first quarter of 2009 was $435,000. (-5.4% from 2008 year’s first quarter)

A standard condominium was priced at $260,000. (-11.6% from 2008 first quarter)

Reported by Moishe Alexander, CFC CEO