Canadian housing hits the wall
Canada is one of the last bubble markets to hit the wall. Buoyed by the commodities boom in the west, Canada looked set to keep on an upward path even while its largest trading partner, the U.S. had already started to see a bust. But, evidence of the housing slowdown is everywhere in Canada.
Will this be a US-style crash or a easing from a high plateau? If one listens to the happy talk from the Canadian Real Estate Association (CREA), one might think Canada is set to resume the upward path shortly. However, to my ears, this chatter sounds eerily reminiscent of the denial we witnessed in the UK and the U.S. before.
First it was Canada’s top 25 markets that were feeling that pain from a slowdown in housing, now it’s clear the malaise has hit the entire country.
Two weeks ago statistics from the Canadian Real Estate Association showed the average sale price of a house in the country’s 25 largest markets was down 0.4% last month from a year ago.
New statistics released Monday show housing across the country is now losing out to inflation. The average sale price of a home in Canada last month was $314,028, a tiny $35 increase from a year ago. For the first six months of the year, prices were up 3.6% from a year ago.
“In essence, Canada’s housing market has pulled back from the record-setting pace set in 2007, but in most provinces it continues at or near sales levels set in the years before that,” says Calvin Lindberg, president of CREA. “The increase in housing prices is also pulling back from the record-setting pace of last year, but we have yet to see any of the price contractions that have impacted the housing market in the United States.”
CREA said there is plenty of good news in the numbers. For the fifth straight year, more than a quarter of a million units were sold in Canada. However, sales over the first six months of the year are down 13.1% from a year ago.
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All the recent talk and numbers seem to me as if the economy is going down, but have a look at the numbers this year and 2006. They are the same, not good, but not bad either. It just seems that 2007 was an “exotic” year. I wouldn`t be so pessimistic just yet and hold the U.S. style crash talk. As an experienced Vancouver realtor I am careful at these times, but I don`t go all pessimistic either. We`ll just have to wait and see. A buyers market is still better than nothing.
Jay
Thanks for you insight on the market. Only time will tell where Canada really is headed, but I would say that housing prices do need to come off in places like Vancouver. There has been too much price appreciation and too much building, especially in the Condo sector. One could see the new supply ramping up as far back as 2004.
Do we have to see US-style declines for things to move back into line? No. But, I certainly expect declines in both transactions and price vis-a-vis 2006 and 2005.