House prices in Canada enjoyed their third consecutive monthly rise in July, with all regions contributing to the national increase for the first time in 13 months (according to the latest Teranet-National Bank National Composite House Price Index). Ottawa led the month-to-month change with a 2.6% increase in July over June, followed by Toronto (2.2%) and Vancouver (1.6%). Nationally, the increase was 1.6%.
On a year-over-year basis, the national composite was down 5.1% in July. Cities with the biggest declines were: Calgary (-11.1%), Vancouver (-9.3%) and Toronto (-4.6%).
The Ottawa house market is indeed thawing out. FOR SALE signs pop up like weeds on front yards and SOLD stickers appear on them a few days later. I was coming out of a Costco (NASDAQ:COST) store in Ottawa a few days ago and overhead one of the clerks tell another that he had just bought a second house. The year-over-year price change in Ottawa never really did get below zero (same for Montreal). If you blinked, you missed the downturn. Let’s give credit to the stability of incomes in the Canadian capital, a government town par excellence.
As for elsewhere around the country, I know mortgage rates are low in Canada and might account for the jump in house sales, but then again, unemployment is still high and rising. That leaves one wondering if news reports several months ago of MLS house prices shooting up (based on the flawed average price indexes published by realtors) created the then questionable impression of house prices surging upward. This may have helped, in self-fulfilling fashion, to change the psychology virtually overnight from aversion to panic buying (buy before house prices go up too much more) and anticipatory buying (let’s chase assets that are appreciating).
I don’t know if house prices will continue on a tear but I do worry somewhat that the high-flying loonie is offsetting much of the stimulus originating from the Bank of Canada, federal government and commodity prices. Then there are the housing prognostications of Yale University economist Robert Shiller (who called the housing and dot-com busts). He says he sees five more years of stagnant house prices in the U.S.