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Canadian housing starts fell 3.1% in April

Mon, 16 May 2011 06:22:22 +0100

Canadian housing starts fell 3.1% to 179,000 annualized units in April following the unexpected 2.2% increase to 184,700 annualized units (downwardly revised from 185,100) seen in March. A slight retracement of the previous month’s surprise increase had been anticipated, with market expectations for a smaller decline in the level of starts to 184,000 annualized units.
The lower than expected level of housing starts in April was concentrated in the multiples and rural starts components. The relatively volatile urban multiple-unit starts fell 5.1% to 96,000 annualized units, retracing almost all of the previous month’s 6.4% rise to 101,200. Rural starts fell a sharp 12.1% to 18,900 annualized units, although this followed an outsized 22.2% increase seen in March. On a more positive note, the generally stable urban-singles component provided some offset by rising 3.4% to 64,100 annualized units.
Declines in Quebec (-9.4%) and Ontario (-8.0%) were the key drivers of the overall decline in Canada, with each of these provinces seeing a significant softening in multiples construction (down 15.4% and 8.8%, respectively). Considerable strength, however, was seen in the red-hot real estate market of British Columbia (23.5%), while Atlantic Canada (10.4%) and the Prairies (5.3%) also saw solid increase in starts in April.
While today’s report indicates that the pace of new home construction declined in April, the level of starts represents an improvement over the 178,100 annualized units seen in the first quarter of 2011. With that said, we do not expect much in the way of further increases in the near term, and our forecast calls for housing starts to remain below 180,000 annualized units through 2012. This level of activity will not provide much contribution to overall economic growth during our forecast horizon, but it represents, in our view, a return to a more stable and sustainable pace of construction following the significant volatility seen in the past three years.
David Onyett-Jeffries, Economist, RBC Economics  To view the economic data calendars with trend charts, go to:

http://www.rbc.com/economics/html_calendars/ca/calendar.html (Canada) http://www.rbc.com/economics/html_calendars/us/calendar.html (United States)

Canada’s Core Inflation Rate Rebounded Smartly

Mon, 25 Apr 2011 21:10:32 +0100

Canada's core inflation rate rebounded smartly in March

Canadian consumer prices rose by 1.1% in March, almost double market expectations for a 0.6% rise in the unadjusted index. The annual inflation rate jumped to 3.3% from 2.2% in February with the first-quarter 2011 average increase at 2.6%. Core inflation, which excludes the eight most volatile items and the effect of changes in indirect taxes, posted a solid 0.7% gain in March. Forecasters were looking for a much milder 0.2% increase. The annual core rate rebounded to 1.7% from a record low 0.9% in February.

Higher costs for travel tours, women's clothing, fresh vegetables, and gasoline support March's large increase. Moderating the upward move were lower vehicle prices, electricity, natural gas, traveller accommodation, and mortgage interest costs. The net effect was that the headline inflation rate increase of 1.1% was the largest since the GST-implementation spike in January 1991.

Relative to a year earlier, the inflation rate was 3.3% in March. This increase reflected the persistent rise in gasoline prices, which were 18.9% higher than a year earlier. Food prices increased 1.5% in the month and were 3.3% higher than a year ago in part reflecting the effect of bad weather in the US and Mexico.

Clothing and footwear prices were 0.9% higher than in March 2010 marking the first annual increase in this component of the CPI since November 2009. Vehicle insurance and homeowners' replacement costs also rose in the 12-month period. Lower mortgage interest costs, and computer and video equipment costs moderated the overall rise.

The elevated headline rate reflects the rise in gasoline prices as well as the effect of the harmonization of provincial sales taxes last July. The Bank of Canada reiterated, in its quarterly Monetary Policy Report that it expects the effect of the tax change will have a transitory upward effect on the headline inflation rate and does not expect this to translate into higher inflation expectations.

Core inflation pressures were benign early in the first quarter of 2011 but roared back in March. The first-quarter 2011 average gain of 1.3% will likely be the low for the cycle given the solid upward momentum in the pace of economic growth established late last year. The Bank of Canada's updated forecast, released last week, showed that it also expects the first quarter to mark the low for core inflation with the rate forecasted to increase gradually to the mid-point of the target band (2%) in the second quarter of 2012 as the output gap, which stood at about 1% at the end of the first quarter, closes completely. Normally this dynamic -- inflation at 2% and output gap closed -- would correspond with the policy rate approaching its neutral level, which is estimated at 4% to 4.25%. The extenuating circumstances during this recovery period including persistent uncertainty and downside risks emanating from countries outside Canada's borders as well as the persistence of the Canadian dollar trading above parity with the US dollar, however, have generated enough concern at the Bank of Canada that it remains extraordinarily cautious about reacting to the closure of the output gap and what usually would be the start of a rising inflation environment.

Rather, concern about the risk that the strong currency will seep into lower import prices and, at the same time, dampen demand for Canadian exports, have kept the Bank of Canada from signalling that it is prepared to restart raising the policy rate in the near term. Our assessment is that the risks associated with keeping financial conditions in Canada "exceptionally stimulative" are to the upside for the inflation outlook and outweigh the downside risks associated with currency strength, potential housing market weakness, or a sharp drop in consumer spending activity. We suspect some of the jump in the March inflation rate will be reversed in the months ahead although the higher starting point will likely result in the second-quarter 2011 average core inflation rate holding above the Bank's 1.4% forecast. Confirmation that the economy is bearing up well will still be needed to convince the Bank that the risks to the outlook are skewed to the upside, thereby making a rate hike at the end of May unlikely at this stage. We maintain our call that the Bank will have the ammunition to raise the policy rate this summer and expect that the overnight rate will end 2011 at 2.0%, 100 basis points higher than today.

Dawn Desjardins, Assistant Chief Economist, RBC Economics

GTA Realtors Report Record Figures

Mon, 25 Apr 2011 07:08:31 +0100

GTA REALTORS® Report Monthly Resale Housing Market Figures
Greater Toronto REALTORS® reported 9,262 transactions through the TorontoMLS® system in March 2011, representing the second best March result on record. The number of transactions was 11 per cent lower than the record result reported in March 2010.

“The strong home sales reported in March and throughout the first quarter of 2011 have been based on a solid affordability picture and improving economic conditions in the GTA and country-wide,” said Toronto Real Estate Board (TREB) President Bill Johnston.

The average selling price for March 2011 was up five per cent year-over-year to $456,147. The strongest average annual price growth was reported for condominium apartments and semi-detached houses, at
approximately seven per cent for both home types.

“Market conditions were tighter in March compared to last year. With more competition between buyers, we have seen a strong but sustainable rate of price growth,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

Canadians confident about buying a home

Wed, 9 Mar 2011 08:13:39 +0000

Majority of Canadians confident about buying a Home, say Housing Market is more balanced: RBC Poll

TORONTO, March 9, 2011— An overwhelming majority of Canadians (90 per cent) are confident about real estate in Canada as an investment and 85 per cent feel that they are doing a good or excellent job of paying down their mortgage, according to the 18th Annual RBC Homeownership Study. Almost three-quarters of Canadians (73 per cent) believe that they or their family are well-positioned to weather a housing drop.

"Canadians believe in the long-term benefits of owning a home including the value it can provide, both personally and as a long term investment," said Marcia Moffat, RBC head of home equity financing. "Last year's survey showed that people were looking to buy ahead of rising costs. This year marks a return to more normal levels of purchase intentions and recent housing data reflects this move to a more balanced market."

Interest in purchasing a home over the next two years has declined slightly but remains high overall, as 29 per cent say it's likely they will buy. This is down two points from 2010 yet higher than any other year since 2006. Compared to last year, fewer Canadians are saying it's better to buy now (55 per cent, a drop of 12 points) than wait (45 per cent, up 12 points). Among those likely to buy, over half (57 per cent) are looking to buy within 18 to 24 months while almost one-quarter (24 per cent) are planning to buy in the next year.

The poll found that 40 per cent of Canadians feel the current housing market is balanced equally between buyers and sellers, a rise of five points over 2010. Homebuyers list rising home prices (26 per cent) as their number one c
oncern about purchasing a home followed by rising mortgage rates (22 per cent).
"There's a lot more to owning a home than just the price, as taxes, fees and repairs can quickly add up. Online tools and calculators along with the advice of a mortgage advisor can help you be prepared for these costs while also looking at which payment features fit your financial plan," added Moffat.

Confidence is high when it comes to housing payments, as with 69 per cent saying that the value of their home has increased in the last two years, a rise of five points over last year.

Highlights from across Canada:
■ British Columbia: Interest in buying a home has remained steady in B.C. with 29 per cent of residents likely to buy a home in the next two years. B.C. leads the country in looking to buy a new home (30 per cent) rather than resale (70 per cent) and one third (34 per cent) of British Columbians are most concerned with home prices increasing, the most in Canada.
■ Alberta: Interest in purchasing a home has declined in Alberta, with one third (33 per cent) saying they are likely to buy in the next two years, down two points from last year (35 per cent). Alberta leads the country in seeing the housing market shifting towards buyers, as 57 per cent say it's a buyers market. Almost one third of home owners in the province (32 per cent) say the value of their home as decreased in the last two years, almost double any other province.
■ Prairies: Saskatchewan and Manitoba lead the country in believing that it's a sellers market, over 23 per cent higher than any other province. Purchase intentions have remained steady in the Prairies, with 29 per cent indicating they are likely to purchase a home in the next two years, up slightly from 2010 (28 per cent)
■ Ontario: Ontario leads the country in seeing the current housing market as balanced (46 per cent). The majority of Ontarians (72 per cent) say they are not likely to buy a home in the next two years, a rise of six points over 2010. Those intending to buy a home are looking longer term, with four-fifths (80 per cent) planning to purchase in the next one to two years, the highest rate in the country.
■ Quebec: Quebec leads Canada in planning to buy a bigger home (59 per cent) and feeling that the value of their home has increased in the last two years (86 per cent). Three-quarters (76 per cent) of homebuyers in Quebec intend to buy in the next one to two years.
■ Atlantic Canada: Almost three quarters of Atlantic Canadians (74 per cent) think it makes more sense to buy now than wait until next year, higher than any other province.

Interest in purchasing a home has declined over last year, with 24 per cent saying it is likely they will buy in the next two years, down two points from 2010.
Canadians can visit the new RBC Advice Centre for advice on the costs associated with purchasing a home. The RBC Advice Centre is an online resource that gives Canadians access to advice about all aspects of their finances including their homeownership goals - whether they are buying their first home, planning their next move, renovating or managing their current home financing. Advice videos are updated regularly to reflect current housing trends and to answer the questions that are top of mind with Canadian homeowners. Interactive tools and calculators provide customized information covering all facets of homeownership. With the guidance of RBC mortgage specialists, Canadians have access to free, no-obligation professional advice and personalized one-on-one service about RBC mortgage products and services.

RBC is the largest residential mortgage lender in Canada. As the country's number one source of financial advice on homeownership, RBC conducts consumer surveys as one way to provide insight to Canadians about the marketplace in which they live. These are some of the findings of the RBC's 18th Annual Homeownership poll conducted by Ipsos Reid between January 12 to17, 2011. The annual online survey tracks Canadians attitudes and behaviours around homebuying and home ownership. It is based on a randomly selected representative sample of 2,103 adult Canadians that was statistically weighted by region, age and sex composition according to the 2006 Census data. The results are considered accurate to within ±2.2 percentage points, 19 times out of 20, of what they would have been had the entire adult Canadian population been polled. The margin of error will be larger within regions and for other sub-groupings of the survey population.