Canada Guaranty Housing Market Review: Quarter 1, 2010
May 20th, 2010 | Mortgage and Housing Market ReviewsJanuary – March 2010
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The first quarter of 2010 witnessed the increase of employment levels, low interest rates and increased home affordability – creating a level of consumer confidence not seen since early 2008. This elevated confidence assisted in further economic recovery by driving growth in both the retail and housing sectors.
First quarter ended on a positive note with a 0.8% increase in retail trade and an annual increase of 46.7% in seasonally adjusted home sales (130,072 units). While home prices have recovered from the lows in 2009, increases have been moderated by the growing number of listings and rising mortgage rates.
The Canadian recovery is reliant on the influential manufacturing sector and its subsequent recuperation to pre-recessionary levels. Although the increase in overall production (1.9%) in January created positive sentiment, points of caution include the rising Canadian dollar, increasing interest rates and the lack of recovery in the beleaguered auto industry.
Coming off the high reached during the fourth quarter of 2009, resale activity slowed slightly to post sales of 130,072 units (seasonally adjusted) in the first quarter. This was complemented by sales increasing in Ontario, Quebec and Newfoundland while British Columbia and Alberta created downward pressure with decreasing activity, compared to last quarter.
The increasing number of listings has moderated pressure on prices as the balance of market moves toward the buyer. Additional supply has created options for market participants, therefore slowing the buying process and creating a moderated outlook by those setting prices.
The average Canadian home price posted appreciated to a value of $340,920 in the first quarter of 2010 to post a 17.6% increase over the value only a year ago.
Weathering the current economic market with strength, the province of Newfoundland posted a price appreciation rate of 18%, versus March 2009, to end the quarter with an average home price of $234,403, thus setting a new high for the provincial real estate market. This, combined with the continued strength in the Halifax market, helped lift the Atlantic provinces to an overall home price of $193,335 (9.7% increase versus March 2009).
In contrast to the concerns of a real estate meltdown one year ago, the province of Ontario has emerged as a market of resiliency and strength. Units sold (versus first quarter 2009) have increased 51.5% to a total of 21,294 with the overall home price on MLS for the opening quarter increasing 19.5% to a value of $349,405.
The small erosion of prices in Quebec has been overcome with ease as the provincial market continues to see moderated impact of the recent economic woes. Year to date, the province of Quebec has posted a 10.9% increase in prices to end the quarter with an average value of $241,566.
The past six months witnessed an increase in sales activity as first-time buyers and those returning to the market took advantage of increased affordability and low interest rates. Moving towards the latter part of 2010, price appreciation and increased mortgage rates will lower affordability, and thus moderate some potential demand.
British Columbia ended the first quarter with an average home price of $504,312 (year-to-date). This 19.1% increase over one year ago has led to a significant decrease in home affordability and is a contributing factor to the slow resale activity in early 2010.
Low unemployment and moderate affordability have created strength in the Saskatchewan and Manitoba markets. These areas of growing demand have been offset, however, by Alberta which continues to struggle with a slow economic rebound. The Prairie Provinces ended the first quarter with a 9.0% increase (vs. 2009) and an average home value of $316,572.
Increasing for the fifth consecutive month, GDP posted a 0.6% growth rate in the month of January.
Despite a 2.4% decrease in new vehicle production the manufacturing sector posted a 1.9% increase in overall results. Further positive signs were seen in the consumer driven retail sales sector (+0.8%) which were led by the home building, food and beverage industries.
The return of the consumer to the market assisted the construction sector (+1.7%) which posted negative results in the non-residential industry but showed relative strength in residential building (+4.0%).
Complementing recovery in other sectors, including natural resources, posted growth due to the recovery of foreign demand. Natural gas, gold, silver and potash extraction increased during January contributing to a 0.9% increase in the sector.
Unemployment remained steady in the month of March at 8.2% although new positions were added to the marketplace.
The leading sectors included the natural resource industry, which posted an increase of 36,000 positions since October 2009 and the construction sector, which continues to reap the benefits of increasing fiscal investment by creating 21,000 positions in the month of March.
Provincially, Alberta was the only province to post an unemployment increase in March, rising to a level of 7.5%. Ontario reversed losses with an increase of 10,000 workers and an unemployment rate decrease to 8.8%. Complementing this were the provinces of Quebec (+6,000 workers, 8% unemployment) and Saskatchewan, which at 5.1%, continues to hold the lowest unemployment rate in the country.
The Bank of Canada has continued the mandate of a low interest rate environment throughout the first quarter of 2010 in an effort to stimulate further economic recovery.
With the rise in leading indicators and an eye on the increasing rates of both inflation and the Canadian dollar, the key interest rate is presumed to be under review and expected to increase through latter 2010.
APPENDIX
|
Canadian Home Prices, year-to-date |
||
|
Market |
Average Price |
Y-Y % change |
|
Newfoundland |
230,268 |
17.8% |
|
Prince Edward Island |
141,916 |
-2.9% |
|
Nova Scotia |
209,002 |
12.3% |
|
New Brunswick |
154,952 |
4.5% |
|
Quebec |
239,860 |
10.5% |
|
Ontario |
344,087 |
20.2% |
|
Manitoba |
213,612 |
10.8% |
|
Saskatchewan |
238,599 |
5.4% |
|
Alberta |
351,634 |
7.7% |
|
British Columbia |
504,312 |
19.1% |
Source: CREA
Disclaimer: This report is provided by Canada Guaranty Mortgage Insurance Company and is for information purposes only. It may not be appropriate for other purposes. This report does not provide material information about the business and affairs of Canada Guaranty Mortgage Insurance Company. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report includes information that contains economic analysis and views, including future economic and market performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. Canada Guaranty Mortgage Insurance Company and any related entities are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.
