Canada’s housing market is showing signs of emerging from its winter hibernation, according to the latest Real Estate Trends report released yesterday by Scotia Economics. Nationally, home sales strengthened in both February and March, and preliminary reports suggest this firming trend continued in April.
The report notes that the rise in demand, combined with fewer new listings, has restored a better balance to the market. The national new-listings-to-sales ratio averaged 2.2 in March, down from a cycle peak of 2.7 last November (about 2.0 is considered balanced). Average home prices steadied in February and March, although they were still down almost 8% year-over-year, or 5% on a regional sales-weighted basis.
“These ‘green shoots’ are encouraging,” said Adrienne Warren, Senior Economist and Real Estate Market Specialist at Scotia Economics. “On an annualized basis, average home prices in early 2009 are running about 6% below last year’s levels, while sales volumes are down 16%. This is tracking a slightly better performance than our forecast for a 10% decline in average prices this year, and at the low end of our forecast for a 15% to 20% drop in sales.”
The federal government’s Home Renovation Tax Credit (HRTC) has a lot of takers according to a recent survey by ResMor Trust, which revealed 94% of Canadian homeowners who are planning to renovate their homes before next February will take advantage of the credit. Of that number, 5% of respondents said they will add the renovation costs to their mortgage.
The HRTC applies to renovations between $1,000 and $10,000, and 83% of survey respondents said they planned to spend within that amount on renovations. Half of those surveyed said they will use savings to pay for the renovations, followed by 30% who will use a line of credit.
Bank of Canada Governor Mark Carney says the elements are in place for an economic recovery to begin later this year, and develop in “full force” in 2010.
“The prospect of [the economy] getting better is there. The policies in place for it to get better are absolutely there,” Carney said in an interview broadcast Sunday on the CBC.
“Part of what is driving recovery in 2010 is policy. It is the fact that monetary policy has been aggressively eased, and secondly there is a big fiscal policy response, not just in Canada but around the world. Those actions are going to start to hit later this year, and then really with full force in 2010.”
Even with a recovery, however, Carney suggested the economy will not return to the “heady days” prior to the onset of the credit crisis, beginning in the summer of 2007. “That’s not likely. It is not likely because there will be an overhang from the financial mess in other countries. It is going to take some time for [this] to be rectified and it is very [likely] that the new equilibrium... is not going to be at the same level.” – Financial Post
Changes to Canada’s accounting rules will help to keep this country’s banks from losing the much-lauded status they’ve gained during the financial crisis, industry players say.
Canada’s Accounting Standards Board unveiled proposed changes late last week to relax mark-to-market rules that apply to some troubled holdings that have been affected by the market turmoil, making it easier for banks and other companies to avoid writedowns.
Banks applauded the decision, saying it goes a long way toward maintaining a level playing field after US standard setters recently introduced new rules.
The sector had argued that, without the proposed changes, Canada’s system would be the most punitive in the world when it came to forcing banks to take writedowns on these holdings. International standards, which apply to European banks, were already more lenient than Canada’s, it argued. And with writedowns eating away at both profits and capital levels, variations in accounting rules could have prompted some investors to shift money to foreign banks. – Globe and Mail
Contractors took out $4.5 billion in building permits in March – up 23.5% from February. The rise ended five straight monthly declines. The March increase came mainly from the non-residential sector in Ontario, Quebec and Alberta.
Market analysts had on average expected a 2.5% increase in March from February. It was the largest month-on-month increase since the 28.7% recorded in March 2007.
Statistics Canada reports permits in the non-residential sector rose 47.9% to $2.3 billion following increases in the commercial and institutional components in Ontario, Quebec and Alberta. – Toronto Star
US consumers felt more confident about the economy last month than at any time since the September failure of Lehman Brothers that pushed global banking to the brink of collapse, a survey showed on Friday.
The Reuters/University of Michigan Surveys of Consumers said its final index of confidence climbed to 65.1 in April from 57.3 in March. That was the highest since September 2008 and the biggest one-month increase since October 2006.
The April reading also marked the first yearly increase since July 2007. Economists polled by Reuters expected a slightly lower final reading of 61.9 for April.
The index of current economic conditions rose to 68.3 last month from 63.3 in March – the best reading in four months. The index of consumer expectations climbed to 63.1 from 53.5, which was also the highest since September of 2008. – Reuters
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