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Home sales edge higher

18 September 2018
By the Numbers

OTTAWA – On seasonally adjusted basis, national homes sales via the Multiple Listing Service of the Canadian Real Estate Association (CREA) showed in small increase in August over July. But on an actual  year-over-year basis, sales fell in yet another demonstration that, while experts agree it’s still healthy, the housing market in this country is cooling.

The realtors group reported on a month-over-month basis, sales edged up 0.9% in August, marking the fourth consecutive month of gains. Roughly half of all local markets recorded an increase in sales from July to August, led again by the Greater Toronto Area (GTA), along with gains in Montreal and Edmonton.

Actual activity was down 3.8% year-over-year in August, due mainly to declines in major urban centres in British Columbia.

Chart courtesy of the Canadian Real Estate Association.“The new stress-test on mortgage applicants implemented earlier this year continues to weigh on national home sales,” CREA president Barb Sukkau said in a statement.

“Improving national home sales activity in recent months continues to obscure significant differences in regional trends for home sales and prices,” CREA chief economist Gregory Klump added. “Moreover, recent monthly sales increases are diminishing, which suggests that the recent rebound may be starting to lose steam.”

The number of newly listed homes was unchanged between July and August, as new supply gains in the Greater Vancouver Area (GVA) and Montreal offset declines in the GTA and Winnipeg.

With sales up slightly and new listings unchanged, the national sales-to-new listings ratio edged up to 56.6% in August compared to 56.2% in July. The long-term average for this measure of is 53.4%.

The actual national average price for homes sold in August 2018 was just over $475,500 – up 1% from the same month last year. The average price has made gains in each of the past five months.

The national average price is heavily skewed by sales in the GVA and GTA – Canada’s largest and most expensive markets – and excluding them cuts the national average price to just under $382,000.

In his research note, Rishi Sondhi of TD Economics said CREA’s August sales report makes its clear housing markets are moving past the government-induced weakness imposed on them earlier this year.

“Questions now centre on the path of the recovery going forward,” he said. “Our view is that sales and prices will continue to grow, but that rising borrowing costs will restrain the pace of expansion. This is particularly true for more expensive markets in Ontario and B.C. where affordability pressures are acute.”

He was also encouraged by signs that B.C.’s market is bottoming out after a period of weakness.

“From the standpoint of overall economic growth, rising resale activity should ensure that residential investment adds to third quarter GDP after subtracting, on average, in the prior two quarters,” Sondhi concluded.

MLS home sales to fall, CREA says in latest forecast

18 September 2018
By the Numbers

OTTAWA – Tougher government regulations that make it harder for some consumers to qualify for a mortgage combined with higher interest rates as well as affordability issues on some parts of the country will cause housing sales through its Multiple Listing Service to fall sharply in 2018, according to the latest forecast the Canadian Real Estate Association (CREA). While they will rebound modestly in 2019, they will remain below the levels seen between 2014 and 2017.

“Economic and demographic fundamentals remain supportive for housing demand in many parts of the country; however, policy headwinds have impacted homebuyer sentiment and access to mortgage financing in many housing markets,” the realtors’ group said on a statement. “Further expected interest rate increases, combined with this year’s new federal mortgage stress test are expected to continue to keep home sales activity in check over the rest of the year and into 2019.”

A few years ago, an economic impact study conducted by CREA indicated every home sold generated furniture and appliance sales of $6,500 over the following three years.

The association said after the new mortgage were announced last October, they were expecting some sales to be pulled forward as buyers raced to complete their deals. “The response to the new policy was stronger than expected. In December 2017, seasonally adjusted national home sales surged to the highest on record before dropping sharply in early 2018,” the forecast said, adding at this point in 2018, the rules continue to weigh on home sales.

Chart courtesy of the Canadian Real Estate Association.“National activity is on track to hit a five-year low in 2018,” CREA continued. “While summer sales activity in and around the Greater Toronto Area (GTA) showed signs of rebounding, this trend may be losing steam. Moreover, additional interest rate increases expected this year and in 2019 will continue to raise the bar that borrowers must clear to qualify for mortgage financing.”

These factors are expected to drive national sales down by 9.8% to 462,900 units in 2018. While this revised forecast is little changed from CREA’s June forecast, they noted stronger than expected activity in Ontario will be offset by weaker than anticipated activity in British Columbia. “Both provinces are nonetheless still projected to post double-digit declines in sales activity this year and account for most of the national decrease,” the association said.

Sales in Alberta and New Brunswick have also been somewhat stronger than expected in recent months, resulting in an upward revision in their 2018 sales forecasts. Activity in both provinces should moderate over the balance of the year compared to levels this summer.

The national average price is projected to ease to $494,900 this year, down 2.8% from 2017 and a reflection of fewer sales in B.C. and Ontario in 2018; however, the forecast has been revised lower as a rebound in British Columbia' sales activity so far remains absent.

It is also expected to be skewed by reduced sales of higher-priced homes, with provinces posting a smaller average price decline compared to the national result. Indeed, more than half of all provinces are projected to see average price gains in 2018, including British Columbia.

Ontario’s average price decline (-1.7%) largely reflects fewer higher-priced sales in Toronto, particularly during the spring which normally sees a seasonal jump in the average price that failed to materialise this year.

Meanwhile, home prices in Eastern Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island are expected to continue rising following steadily firming market conditions in recent years.

Home prices are projected to edge down by about 1.5% in Alberta, Saskatchewan and Newfoundland & Labrador.

In 2019, national sales are forecast to rebound modestly (+2.1%) to 472,700 units but remain below annual levels recorded in 2014 through 2017. The anticipated partial recovery over the second half from deferred purchases over the first half of the year – already evident in Ontario but not in B.C. – is anticipated to fade over 2019 in tandem with further expected hikes in interest rates.

The national average price is forecast to rebound by 2.7% to $508,400 in 2019, reflecting modest average price growth in several provinces and the return of the normal seasonal pattern for sales and average prices in Ontario. Indeed, the forecast increase in average price for Ontario (3.3%) is larger than for any other province in 2019. The average sale price in B.C. is also forecast to rise but by less than the rate of consumer price inflation.

Market balance is continuing to firm in Quebec, New Brunswick, Nova Scotia and Prince Edward Island. Further modest price increases in these provinces are forecast in 2019, although price gains should be held in check by rising interest rates. Meanwhile, prices are forecast to remain stable from 2018 to 2019 in Alberta, while further edging down in Saskatchewan and Newfoundland & Labrador.

Housing starts cool further

13 September 2018
By the Numbers

OTTAWA – The Canadian housing market continued its cooling trend in August with starts falling by all three of the measures used by the Canada Mortgage & Housing Corporation (CMHC). By the trend measure, housing starts totalled 214,598 units on a annualised basis last month, compared to 219,656 units in July, a decline of about 2.3%.

The trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts and is used by the federal housing agency to account for swings in monthly estimates, which it says can be misleading, as they are largely driven by the multi-unit segment of the market which can vary significantly from one month to the next.

“The national trend in housing starts continued to decline in August from the historical peak that was recorded in March 2018,” CMHC chief economist Bob Dugan said in a statement. “This moderation brings total starts closer to historical averages, largely reflecting recent declines in the trend of multi-unit starts from historically elevated levels earlier in the year.”

Chart courtesy of the Canada Mortgage & Housing Corporation.The standalone monthly SAAR of housing starts for all areas in Canada was 200,986 units in August, down from 205,751 units in July. The SAAR of urban starts decreased by 2.5% in August to 184,925 units. Multiple urban starts decreased by 2.4% to 132,700 units in August while single-detached urban starts decreased by 2.6% to 52,225 units.

Rural starts were estimated at a seasonally adjusted annual rate of 16,061 units.

Actual starts were down by double digits for both single family homes in urban areas – defined as towns with populations of 10,000 or more – and the multi-unit segment.

CMHC pegged single family home starts at a preliminary 4,748 units in August – down 18% from the 5,782 units begun in August 2017. The decline was felt in every region of the country, except Atlantic Canada where they gained 3.0%.

For the opening eight months of the year, single family starts were down 13% to 36,318 units – compared to 41,576 units for the same period of 2017. Taking the biggest hit was Ontario, where starts were down 18%. But, once again, the only region showing an uptick was Atlantic Canada where starts were up 10% for the year-to-date.

Meanwhile, multi-unit segment starts – whether apartments, townhouses or other linking dwellings whether for the condominium or rental market – fell 10% in August to 10,823 units, from 12,039 units for August 2017. The decline was most keenly felt in Ontario and Quebec, as the Atlantic region, the Prairies and British Columbia all saw healthy upticks.

However, for the year-to-date, multi-unit segment starts were up 5% to 91,027 units. Gains were recorded in Atlantic Canada, Quebec, Ontario and B.C. with only the Prairies showing a downturn.

Total starts were off 13% for the month of August at 15,571 units. Once again, Quebec and Ontario recorded the steepest drops at 31% and 35% respectively.\

For the year-to-date, total starts were up a modest 1% to 127,345 units thanks to overall gains made in B.C., the Prairies, Quebec and Atlantic Canada in the first half of the year.

In his research note, Rishi Sondhi of TD Economics pointed out the declines were led by drop-offs in housing construction in Canada’s three largest cities – Toronto, Vancouver and Montreal.

“August’s moderation in homebuilding, while surprising, is consistent with our view that starts will pull-back from their elevated first-half pace to a rate more in-line with underlying fundamentals,” he said. “That said, homebuilding remains healthy when viewed on a trend basis, supported by robust population growth and firm economic conditions. Moreover, solid permit issuance points to homebuilding maintaining a healthy pace in the near-term.”

He also noted that housing starts are proving to be softer in the third quarter of 2018 than they were in the second. “Still, residential investment overall is likely to add to growth, driven by rising resale activity,” he added.

Korson names VP sales

13 September 2018
Furniture, People

WOODBRIDGE, Ontario – Korson Furniture Design has appointed industry veteran Agostino Cipolla as vice president of sales and marketing for the Canada and United States. He will continue to act as the company’s account executive for Greater Montreal and Quebec.

He took up his expanded role on 01 September and will be responsible for all Korson sales in North America. Prior this appointment, Cipolla held executive positions with Mobital Furniture, NCA Designs and Karya Furniture.

Agostino Cipolla“Under Agostino’s leadership we will focus on executing new strategic initiatives in all segments and markets,” Vince Napolitano, principal of Korson Furniture, said in a statement, adding, “Agostino will be instrumental in increasing our Canadian and U.S. sales.”

“I'm excited to lead this dedicated and passionate team,” Cipolla said. “Korson’s vision for providing contract quality home furnishings is ever-so inspiring. I plan to use my experience as vice president of marketing and sales to grow the brand, provide market research to influence product sales and development, and create strategies for increasing customer engagement.”



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