North American markets may have hit bottom, say experts
Housing markets in Canada and the United States are showing signs of emerging from their winter doldrums.
The latest Real Estate Trends report released Tuesday by Scotia Economics said home sales strengthened in both February and March across the country, and preliminary reports suggest this firming trend continued in April.
The report by Adrienne Warren, senior economist and real estate market specialist with Scotia Economics, said a rise in demand combined with fewer new listings has restored a better balance to the market.
Those encouraging signs are being felt from the United States to the Calgary real estate market. On Tuesday, Federal Reserve chairman Ben Bernanke told Congress the three-year U.S. housing bust may be near a bottom and he expected the recession to end this year barring a relapse of the financial crisis.
Bernanke sounded more confident than he had in recent weeks that the pieces were in place for an economic recovery, although he acknowledged that growth would remain subdued and unemployment high after the recovery begins.
Also Tuesday, Caterpillar Inc. chief executive Jim Owens said the U.S. residential real estate market is “finding a bottom” as starts won’t meet demand. And Bank of Canada governor Mark Carney said in a weekend interview that the elements are in place for an economic recovery to begin later this year and develop “full force” in 2010.
All those elements are showing some sense of optimism going forward as the TSX ended slightly higher on Tuesday after touching its highest level in almost six months. It closed up 10.35 points, or 0.1 per cent, at 9,880.72. Earlier in the day, it hit 9,918.93, its highest level since early November.
Last Friday, the Calgary Real Estate Board reported its monthly MLS data for April which showed the market was springing back to life with both sales activity and price levels “relatively buoyant,” said Dan Sumner, economist with ATB Financial.
Lorena McDonald, founder and owner of Home Link Design Inc., has witnessed the spike in real estate activity on the local level.
The company was created to give people quick and efficient online interior design services and decorating advice via the web. People use the service to stage their homes for selling.
“The website has really gone off. I have been very busy,” said McDonald. “Also with the Realtors, because there’s a lot of homes still sitting on the market, I have had a lot of people calling. . . . A lot of people right now want something that is cost-effective and they want something where they can do it pretty fast in the sense of using existing furniture that’s already in the home.”
Bonnie Wegerich, president of the local real estate board, said year-over year declines have slowed. In April, there were 1,290 single-family home sales in Calgary, an increase of 19 per cent from 1,086 sales in March, but a five per cent drop from the 1,363 sales a year ago. The number of condo sales for April was 579, a 30 per cent hike from the 446 condominium transactions recorded in March, but a 0.3 per cent decline from April 2008 when 581 condominiums changed hands.
The average price of a single family home in Calgary in April was $ 426,311, increasing by one per cent from March when it was $420,354, but down 10 per cent from April 2008’s $474,564. The average price of a Calgary condo was $277,953 in April, off two per cent from the March price of $284,056, and an 11 per cent decrease from the April 2008 level of $312,586.
“It appears as though first-time home buyers may be cushioning the blow to the housing market caused by the general economic malaise,” said Sumner. “This development is a likely consequence of the massive incentives currently in place, such as record low interest rates and government rebates.
“As we enter the busy spring buying season, the true health of the Calgary housing market will become more apparent. Although prices and sales activity have been stable during the past few months, some further weakness is not out of the question.”
At the national level, Warren said average home prices in early 2009 are about six per cent below last year’s levels, while sales volumes are down 16 per cent.
“This is tracking a slightly better performance than our forecast for a 10 per cent decline in average prices this year, and at the low end of our forecast for a 15 per cent to 20 per cent drop in sales,” she said.
“Nonetheless, we still feel there is more downside than upside risk to home sales and prices. The significant deterioration in domestic labour markets in recent months suggests little prospect for a major resurgence in demand near-term. Meanwhile, a still high level of active listings relative to underlying demand will continue to pressure prices.”
Warren also said residential construction is being reined in even faster than anticipated as builders are responding quickly to falling new home prices, rising inventories and greater resale competition.
She said the many construction cranes still dotting the skylines are raising concern over a pending oversupply of highrise units.
“The greatest risk appears to be in Calgary, where the number of unsold units is slightly above its long-term average and rising,” said Warren.
(Mario Toneguzzi, Calgary Herald, May 6, 2009)