Canada Mortgage and Housing Corp. Update - May 27th, 2020
Canada Mortgage and Housing Corp. (CMHC) released a doomsday-style housing forecast May 27 that envisioned a nightmare collapse of the housing market with national sales dropping up to 29 per cent, starts plunging by from 50 per cent to 70 per cent and average house prices dropping as much as 18 per cent with no real recovery until 2022.
“Canada will see a historic recession in 2020 with significant falls in indicators of the housing market,” stated the Housing Market Outlook special edition spring 2020.
Bob Dugan, CEO of CMHC was quick to add the disclaimer that , “this housing outlook is subject to unprecedented uncertainty due to the pandemic” during a conference call with media.
The report states that Western Canada will be hit particularly hard, due to the Prairie provinces’ reliance on the resource industry and British Columbia’s exposure to the tourism and hospitality sector, which have been hammered by the global COVID-19 pandemic.
But CMHC’s uncertainty about its forecast is well placed, according to residential industry experts, who say there are early, positive signals that the current downturn could be brief, if brutal.
“We are already seeing inquires from home buyers up 5 per cent from pre-COVID levels,” said Elton Ash, Western Canada executive vice-president for Re/Max. Ash noted that the high level of housing sales at the start of this year is an indication of coiled demand that will lead to a quicker recovery than most expect. Ash is particularly bullish on Metro Vancouver, noting benchmark home prices increased in April and May, compared to a year earlier, even as sales crashed in the face of the pandemic.
“To see the price drop that CMHC is suggesting is unrealistic,” Ash said. He sees downward price adjustments in B.C. of perhaps 5 per cent to 10 per cent, depending on the region.
“Yes, there has been some economic pain, but not to the extent that CMHC is suggesting,” he said.
Ash added that realtors and consumers have widely embraced the latest technology for virtual home tours, listings and communication, which has allowed many home transactions to proceed.
Brendon Ogmundson, chief economist of the BC Real Estate Association, is also confident that the “resiliency” of home buyers will lead to recovery later this year, following the plunge in housing sales with the arrival of COVID-19.
“We should be happy sales only fell by 50 per cent when you consider this is a global pandemic,” he said. Ogmundson said home prices in B.C. will remain fairly stable because the number of homes for sale has declined nearly 25 per cent because of social distancing. In April, he added, the benchmark provincial home price was 7.8 per cent higher than in April of 2019.
BCREA expects a sales recovery to begin in the second quarter, fed by “super low mortgage rates and pent-up demand,” Ogmundson said,
Ogmundson also noted that the majority of lost jobs are in the lower-end of income levels. “This will have more of an impact on the rental housing market rather than those buying homes,” he suggested.
Copyright © Western Investor
REGINA REAL ESTATE MARKET UPDATE
May 5, 2020
COVID-19 has had significant economic impact across all sectors of the economy. Despite those challenges, the Saskatchewan real estate market has been relatively resilient to date.
While Q1 new listings and average prices were down 4.4% and 0.2% respectively over last year, Q1 sales were up 7.0%. The true impact of the pandemic, however, was not going to begin to be felt until April, and although activity was down, it was not down as much as anticipated.
Across the province, new listings were down 48.1% from April of last year while sales were down 45.1%. This contrasts significantly from the SARS pandemic which saw transactions in some markets fall up to 72% and cease completely during COVID-19 in certain markets. Average home prices in April fell 3.2% year-over-year which is consistent with the modest price decline experienced in other markets affected by pandemics.
Evidence from prior pandemics suggest that transaction volumes return to normal quite quickly once physical distancing measures are relaxed. The province is just beginning to re-open the economy and we anticipate that “the real estate industry in Saskatchewan will likely emerge from this shutdown with only a few cuts and scrapes,” said Saskatchewan REALTORS® Association CEO Jason Yochim.
Home sales produce approximately $54,000 in additional spinoff spending across multiple sectors of the economy. Reduced restrictions on the home buying process have the potential to boost employment and help the provincial economy to recover and offset some losses in other areas of the economy.
“The number of employment opportunities and essential economic activities that are created when a home is bought or sold is significant,” said Yochim. “Sales that don’t occur during this pandemic will be recovered once the province has opened up again.”
Saskatchewan REALTORS® have taken every action possible to protect public safety concerning COVID-19 and recognized early on that business could not carry on as usual. The industry has worked hard to develop and provide a significant amount of virtual resources for REALTORS® as well as buyers and sellers which has proved to be invaluable while practicing social distancing.
Sales in Regina were down 50.2%, going from 289 in April 2019 to 144 in April 2020, and down 51.0% in the overall region, going from 349 to 171. In Regina, sales were 38.2% below the 5-year average (and 45.9% below the 10-year average), while in the larger region, sales were 37.7% below the 5-year average (and 45.4% below the 10-year average). Year-to-Date (YTD) sales in Regina fell 23.6% over last year, decreasing from 814 to 622, while YTD sales in the larger region also fell 21.2%, going from 946 to 745.
Sales volume was down 49.6% in the city, going from $87.1M to $43.9M in 2020 (39.8% below the 5-year average, and 47.7% below the 10-year average). YTD sales volume in the city was $184.8M, a decrease of 24.0% from last year. In the region, sales volume was down 50.6%, going from $103.8M to $51.3M (40.1% above the 5-year average and 48.0% below the 10-year average). YTD sales volume also decreased 19.8% in the region, falling from $280.1M in 2019 to $224.6M in 2020.
The number of new listings in April 2020 fell significantly from the number last year. In Regina, new listings fell 50.8%, going from 581 to 286 (42.6% below the 5-year average and 44.1% below the 10-year average), while in the region the situation was similar, with new listings falling 52.4% from 792 last year to 377 this year. Active listings also fell 17.0% in Regina (down from 1,457 to 1,209) and 17.1% in the region (down from 2,046 to 1,697).
The sales to listing ratio was 50.3% in Regina and 45.4% in the region suggesting somewhat balanced market conditions in the area.
Homes in Regina stayed on the market an average of 62 days in April—up a modest 1.6% from 61 days last year (but still above the 5-year average of 52 days and the 10-year average of 41). Homes in the region stayed on the market somewhat longer than homes in the city at 70 days on average in 2020, but also down from an average of 66 days last year.
Median home prices in Regina went from $283,000 to $287,925 (an increase of 1.7%) and were approximately 1.8% below the 5-year and 2.9% below the 10-year average median price. The MLS® Home Price Index (HPI)—a more accurate measure of house price trends—was down 0.2% from $271,300 to $271,100. Median home prices in the region also increased 0.7%, going from $283,000 to $285,000 which is 2.1% below the 5-year and 3.4% below the 10-year average median price.
House prices will fall 10% before recovery: Moody’s
Western markets will take worst hit, but some analysts see a rebound as early as JuneFrank O'Brien Western InvestorApril 30, 2020
Housing sales, prices and starts across Canada will plunge this year and stay muted for at least a year, with Western provinces taking the worst hit, according to Moody’s Analytics.
Other analysts, however see a more brief, shallow downturn that could reverse as early as June.
“The COVID-19 pandemic along with the collapse in oil prices will create a perfect storm this year for both home sales and residential construction,” according to Abhilasha Singh, an economist at Moody’s Analytics who authored the Canada Housing Outlook, released April 30.
The negative effect will be felt acutely in the West because of its economic makeup, the report states.
“British Columbia is most exposed in terms of leisure/hospitality and trade, while the Prairie provinces—which were already dealing with softening demand for energy—are most vulnerable to the collapse in oil prices,” Singh said.
Moody’s is forecasting a national contraction of the baseline GDP by 15 per cent in the second quarter of 2020, compared to year earlier, while the unemployment rate will nearly doubles] to 10 per cent. This will cause housing starts to fall to 145,000 annualized units by the end of 2020, compared with 210,000 in early 2020.
While the report highlights the “extraordinary measures” taken to lower lending costs, including slashing the Bank of Canada interest rate to 0.25 per cent in March and a subsequent reduction in the five-year mortgage to below 3 per cent, it warns home buyers, worried about job losses, will remain sidelined.
“Not even lower interest rates will be enough to save the housing market,” Singh said.
As a result, Moody’s Analytics expects Canadian home prices to suffer a peak-to-trough decline of about 10 per cent.
“As the outlook begins to improve in early 2021, house prices are expected to rebound,” the report notes.
Nationally, the composite house price index is forecast to decline 2.7 per cent this year and 3.6 per cent in 2021, but increase in 2022.
In comparison, home prices in Metro Vancouver are forecast to drop 4.2 per cent this year and a further 6 per cent next year and continue to decline by 2 per cent in 2022 before a tepid recovery three years from now.
Calgary, which saw housing sales plunge 63 per cent by mid-April compared to a year earlier, according to the Calgary Real Estate Board and RBC Economics, could suffer the worst house price decline in Canada.
Moody’s forecasts Calgary home prices falling 8.3 per cent this year and 8.8 per cent in 2021, though it projects a potential double-digit price increase by 2023.
RBC Economics and the Canadian Real Estate Association (CREA) forecast a more shallow and shorter downturn in the housing market due to COVID-19 and its trailing economy malaise.
CREA expects to see housing sales returning to a strong pace in 2021.
“This will be a temporary shock,” agreed Robert Hogue, of the macroeconomic and regional analysis group with RBC Economics, who says the recovery could start as early as mid-2020.
“We expect stronger activity to resume once social distancing orders are relaxed. Our baseline assumption is sometime in June. Exceptionally low interest rates will help spur the recovery,” Hogue said.
“Our current view is the recovery will stretch into 2021 in most markets,” he added. “Odds of a major price drop are still low.”
The exception to this rosy scenario is the Prairies, Hogue warns.
“ The plunge in crude oil prices are poised to further drive [Prairie home] prices lower,” he said.
Copyright © Western Investor
Saskatchewan Residential Real Estate Market sees little effect of COVID-19 in March
Sales in Regina were up 1.9%, going from 210 in March 2019 to 214 in March 2020, and up 11.5% in the overall region, going from 235 to 262. In Regina, sales were approximately 2.0% below the 5-year average and just over 9.0% below the 10-year average, while in the region overall, sales were 3.7% below their historical averages.
Year-to-Date (YTD) sales in Regina fell 8.6% over last year, decreasing from 525 to 480, while YTD sales in the larger region fell a more modest 3.7%, going from 597 to 575.
Sales volume was up 5.3% in the city, going from $62.4M to $65.7M in 2020 (3.4% below the 5-year average).
YTD sales volume in the city was $141.5M, a decrease of 9.3% from last year. In the region, sales volume was also up 19.0% going from $68.3M to $81.3M (2.9% above the 5-year average).
YTD sales volume decreased 1.7% in the region, however, falling from $176.3M in 2019 to $173.4M in 2020.
The number of new listings in Regina fell a significant 19.5% from March of last year, going from 534 to 430 (over 13.0% below the 5- and 10-year averages), while in the region the
situation was slightly better with new listings only falling 16.1% from 670 last year to 562 this year.
Active listings also fell 4.6% in Regina (down from 1,344 to 1,282) and 4.2% in the region (down from 1,836 to 1,759).
The sales to listing ratio was 49.8% in Regina and 46.6% in the region suggesting somewhat balanced market conditions in the area.
Homes in Regina stayed on the market an average of 68 days in March—down 6.8% from 73 days last year (but still above the 5-year average of 58 days).
Homes in the region stayed on the market somewhat longer than homes in the city at 75 days on average in 2020, but also down from an average of 84 days last year.
Average home prices in Regina went from $297,134 to $307,140 (an increase of 3.4%) and were approximately 1.0% above the 5- and 10-year average price.
The MLS® Home Price Index (HPI)—a more accurate measure of house price trends—is up 1.8% from $266,500 to $271,300. Average home prices in the region also increased 6.8%, going from $290,559 to $310,250 which is also approximately 0.3% above historical averages.
The REALTOR® Code
CREA’s REALTOR® Code has been the measure of professionalism in organized real estate for over 40 years. The first code was approved in 1913; members approved the first code of ethics specific to CREA members in 1959. The Code has since been amended many times to reflect changes in the real estate marketplace, the needs of property owners and the perceptions and values of society.
A REALTOR’s® ethical obligations are based on moral integrity, competent service to clients and customers, and dedication to the interest and welfare of the public. The REALTOR® Code, by setting high standards of professional conduct for REALTORS®, helps to protect Canadians’ rights and interests. It also creates a level of trust between REALTORS® and their clients.
A STRICT STANDARD OF CONDUCT
The REALTOR® Code establishes a standard of conduct, which in many respects exceeds basic legal requirements. This standard ensures the protection of the rights and interests of consumers of real estate services. As a condition of membership, all REALTORS® agree to abide by the Code.
Key items of the Code include:
- REALTORS® must disclose in writing whom they are representing as an agent in the transaction, and explain to parties in a transaction the details of the agency relationship; and
- REALTORS® can’t acquire an interest in property (either directly or indirectly) without disclosing the fact that they’re real estate professionals.
THE CODE AND THE LAW
The REALTOR® Code establishes obligations that may be higher than those mandated by law. However, in any instance where the code and the law conflict, the obligations of the law must take precedence.
Courtesy of: Canadian Real Estate Association (CREA) CREA.CA