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30 December 2008
House prices continue to plummet in the United States but consensus in Canada is the
impact of the downturn will not be as severe here.
Home prices in 20 major U.S. cities are now falling faster than at any point on record, hit
hard by increasing foreclosures and slumping sales.
The S&P/Case-Shiller index declined 18% in October from a year ago after dropping
17.4% in September. The gauge has fallen every month since January, 2007.
House prices have been falling fast in Canada, as well. The Canadian Real Estate
Association, which represents 100 real estate boards across the country, said this
month that average price of a Canadian home sold in November was down 9.8% from a
year ago.
Canadian housing sales also hit a seven-year low last month, according to CREA. It
said there were 27,743 sales in November on a seasonally adjusted basis, the lowest
monthly level since January, 2001. It was a 12.3% decline from a month earlier.
Michael Gregory, senior economist with BMO Capital Markets, said despite the
slowdown in Canada "we won't even come close" to what is happening in the United
States.
He pointed to stronger employment numbers and income growth here as well as
banking system that "continues to make mortgages" available to Canadian consumers.
But he cautioned if unemployment numbers rise in Canada, there will be a larger fallout
for the Canadian housing market. "Anyway you slice it, if you don't have a job, you
can't get a mortgage and you can't buy a house."
How bad the market in Canada is depends on who you talk to. Some Canadian
commentators have called for the creation of a S&P/Case-Shiller index here. It is based
on tracking repeat sales of single family homes.
CREA has said the Canadian number is skewed by the fact houses are not selling as
fast this year as in 2007 in some of the more expensive markets like Vancouver. Using a
weighted national average price for sales on the Multiple Listings Service, it said prices
fell only 4.7% last month.
Ted Zaharko, who owns Royal LePage Foothills Real Estate Services in Calgary, says
Canadians are following the U.S. too closely and expecting the same market conditions
to happen here.
While prices and sales continue to fall in Calgary, he figures the market has bottomed
out in the city which surpassed Toronto as the second most expensive place to buy a
home during this housing cycle.
"We have people putting ridiculous offers in on a home and nobody is selling. People
are saying 'l'll wait for prices to drop.' It's not going to happen," says Mr. Zaharko.
Prices were down 4.2% in Calgary in November from a year ago, according to CREA.
The U.S. survey found all 20 cities with decreasing prices in October, led by a 33% drop
in Phoenix and a 32% in Las Vegas. The 20-city index is down 23% from its 2006 peak.
"We're seeing a shift to a housing market that is driven by a poor economy rather than
a housing market that's driven by oversupply," said Guy Lebas, chief economist at
Janney Montgomery Scott LLC in Philadelphia. "The credit problems that hit in October
exacerbated the speed of it."
-- Financial Post with files from Bloomberg
House prices continue to plummet in the United States but consensus in Canada is the
impact of the downturn will not be as severe here.
Home prices in 20 major U.S. cities are now falling faster than at any point on record, hit
hard by increasing foreclosures and slumping sales.
The S&P/Case-Shiller index declined 18% in October from a year ago after dropping
17.4% in September. The gauge has fallen every month since January, 2007.
House prices have been falling fast in Canada, as well. The Canadian Real Estate
Association, which represents 100 real estate boards across the country, said this
month that average price of a Canadian home sold in November was down 9.8% from a
year ago.
Canadian housing sales also hit a seven-year low last month, according to CREA. It
said there were 27,743 sales in November on a seasonally adjusted basis, the lowest
monthly level since January, 2001. It was a 12.3% decline from a month earlier.
Michael Gregory, senior economist with BMO Capital Markets, said despite the
slowdown in Canada "we won't even come close" to what is happening in the United
States.
He pointed to stronger employment numbers and income growth here as well as
banking system that "continues to make mortgages" available to Canadian consumers.
But he cautioned if unemployment numbers rise in Canada, there will be a larger fallout
for the Canadian housing market. "Anyway you slice it, if you don't have a job, you
can't get a mortgage and you can't buy a house."
How bad the market in Canada is depends on who you talk to. Some Canadian
commentators have called for the creation of a S&P/Case-Shiller index here. It is based
on tracking repeat sales of single family homes.
CREA has said the Canadian number is skewed by the fact houses are not selling as
fast this year as in 2007 in some of the more expensive markets like Vancouver. Using a
weighted national average price for sales on the Multiple Listings Service, it said prices
fell only 4.7% last month.
Ted Zaharko, who owns Royal LePage Foothills Real Estate Services in Calgary, says
Canadians are following the U.S. too closely and expecting the same market conditions
to happen here.
While prices and sales continue to fall in Calgary, he figures the market has bottomed
out in the city which surpassed Toronto as the second most expensive place to buy a
home during this housing cycle.
"We have people putting ridiculous offers in on a home and nobody is selling. People
are saying 'l'll wait for prices to drop.' It's not going to happen," says Mr. Zaharko.
Prices were down 4.2% in Calgary in November from a year ago, according to CREA.
The U.S. survey found all 20 cities with decreasing prices in October, led by a 33% drop
in Phoenix and a 32% in Las Vegas. The 20-city index is down 23% from its 2006 peak.
"We're seeing a shift to a housing market that is driven by a poor economy rather than
a housing market that's driven by oversupply," said Guy Lebas, chief economist at
Janney Montgomery Scott LLC in Philadelphia. "The credit problems that hit in October
exacerbated the speed of it."
-- Financial Post with files from Bloomberg
