A Cold Spring for the Canadian Housing Market

Posted by David Rosenberg - Gluskin Sheff

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Canadian existing home sales tumbled 9.5% MoM in May (-4.3% YoY) — not really a huge surprise as an earlier report on large-city sales flagged a decline. The weakness was spread across the country with nearly 70% of cities reporting declines.

Average home prices rose 8.5% year-over-year, clearly rolling over from the double-digits gains recorded earlier in the year.  Across the country, the pricing picture is very divided — some cities in the east reporting declines while Ontario and Toronto are still seeing large increases.

The biggest thing on our worry list with respect to the Canadian housing market is the supply backdrop.  On a year-over-year basis, new listings are up over 20% and inventory of unsold homes is at 6.1 months’ supply, the highest since April 2009.  It is not just the existing housing market that has us worried. We estimate that in the new housing market, builders have been building inventories for the past 7-8 months.  On top of this, some demand has likely been pulled forward to this quarter ahead of the introduction of HST in B.C. and Ontario.

All told, this points to a much slower market in the second half of the year and in our view, it is very likely that home prices across the country will see outright declines.


Also in today’s issue of Breakfast with Dave – Summary HERE Full Article HERE

• While you were sleeping: A mixed performance in Asian equity markets, but the European bourses are rallying on strong economic data out of the U.K.; however, the pro-risk trade is not evident in the FX market

• Getting a grip on reality: double-dip recession risks in the U.S. have risen substantially in the past two months

• Bonds still having more fun: the general investing public is still focused on the fixed-income market — the latest mutual fund flow data shows that $4.7bln were invested in bond funds

• The outlook is one of deflation, corporate balance sheet strength and liquidity, intense volatility and ongoing sovereign credit concerns

• U.S. housing hangover: one of the first post-tax credit housing data was a huge disappointment

• Producer prices in the U.S. remains tame

• U.S. production improving but still loads of slack in the economy

• Bank of Canada’s Carney still dovish and in data-watching mode