A run down of what's going on in the market and the company.

Monday, August 16, 2010

Canadian home sales sink 30%

Market stalls in July, though prices 1 per cent above year-ago levelss

Steve Ladurantaye
Globe and Mail Update
Published on Monday, Aug. 16, 2010 9:13AM EDT
Last updated on Monday, Aug. 16, 2010 11:04AM EDT

Canada’s housing market stalled in July as sales sank 30 per cent from the same month a year earlier, the Canadian Real Estate Association said Monday.

Prices edged up 1 per cent from July 2009, though slipped 3.5 per cent from June, with sellers finding far fewer buyers willing to step into the market.

The average resale price nationally was $330,351, according to the Canadian Real Estate Association. In June, the price was $342,662.

“We expect a downward correction of nearly 10 per cent in the monthly average prices, followed by several years of stagnation of price growth at the rate of inflation, in order to bring Canadian house prices back to balance,” TD Bank economist Grant Bishop said.

The country's largest cities led the annual decline, with Vancouver posting a 45-per-cent drop in sales.

CREA, a trade association that governs the country's 100,000 real estate agents, attributed the decline to an increased number of sales earlier in the year and said the “outlook for economic and job growth remains generally positive nationally.”

“The soft sales figures we're seeing right now can be attributed in part to accelerated home purchases earlier in the year,” CREA president Georges Pahud said in a statement. “Activity may remain at lower levels for some time, but ultimately we expect a more stable market to emerge, with demand coming back into line with economic fundamentals.”

Earlier this month, CREA lowered its forecast for the year, saying sales would post an annual decline of 1.2 per cent compared to 2009, which saw the market rebound with an unprecedented intensity from the recession. It also forecast prices would end the year at $331,600 - slightly higher than July's average.

Economists suggest many Canadians bought houses earlier in the year than they would have otherwise to take advantage of low interest rates. This caused huge gains in the first half of the year, but is expected to mean a lull as the year winds down.

“While the softening in sales is very real, we continue to view it as a giveback (a big giveback, admittedly) to the surge in sales in the first half of the year,” BMO said in a research note. “Anyone who wanted to buy a home this year seems to have done so already. Still, note that prices remain a bit above year-ago levels in all major cities, and it’s tough to see the market spinning lower amid a sturdy employment backdrop and a still very low interest rate environment.”

The introduction of the Harmonized Sales Tax in British Columbia and Ontario also contributed to the slower sales, with buyers trying to beat the July introduction even though it didn’t have a direct connection with resale homes.

“While existing homes sales are not directly taxed, they could still experience an outsized pullback during that month as some previously untaxed housing-related services now fall under the HST,” Mr. Bishop said.

“Additionally, the anecdote is that a certain of amount of new home buying was moved-forward by mistaken homebuyer perceptions that purchases ahead of HST implementation would save the tax, ignoring that the pre-HST rush may have actually pushed up prices, with consequent give-back in July.

CREA said the number of listings fell by the most in a decade in July at 7.2 per cent, as homeowners opted to stay put rather than sell into a weaker market. Since April, new listings have fallen 17.5 per cent, which the organization said will help lead to a “balance between supply and demand and temper home price volatility.”

The seasonally adjusted number of months of inventory in July was 7.3 months. That's how long it would take to sell every listed house at the current pace of sales, and it's at its highest level since March 2009.

Wednesday, August 11, 2010

June new home sales dive 46%

That may be good news for buyers looking for quality and a bargain

Terrence Belford
From Friday's Globe and Mail
Published on Thursday, Aug. 05, 2010 1:02PM EDT
Last updated on Thursday, Aug. 05, 2010 4:29PM

June’s new home sales are in. If you’ve been following the trends, the results will come as no surprise.

The month traditionally kicks off the summer doldrums in both low- and high-rise sales in the GTA. Peak times are from mid-March to mid-May and mid-September to the early days of November.

This past June, low-rise sales totalled 1,156 units; that is a 24-per-cent drop from May and a whopping 46-per-cent drop from June, 2009.

New high-rise condo sales in the GTA totalled 1,764 suites. They were a bright spot in the housing picture – up 20 per cent from May and down just 1 per cent from last year.

The slower pace of new housing this year may have brought good news for those who did indeed buy. Last week, J.D. Power released its fifth annual survey on new home buyer satisfaction and the results show a sharp jump in Power’s satisfaction ratings.

Last year, only 8 per cent of the 1,864 buyers of low-rise homes – detached, semis and townhouses – surveyed said their home was free of defects when they took possession. This year that number is 20 per cent. While Power does not explain this significant increase, my sense is that it may be linked to a slower pace of activity in the industry.

Less demand for their product this year has meant builders need not rush to capitalize on high demand. Trades have more time to do the job right. No need to bring in inexperienced workers to lay bricks, fasten and finish drywall and do the fine carpentry required for cabinets, countertops and window trims.

The Power survey also revealed another bonus for buyers. Those offered discounts on asking prices almost doubled this year. Again I think this can be directly related to a slowdown in demand. To stay in business builders have to build, which means they also have to sell what they have built.

Fewer buyers means greater competition and greater competition means offering deals.

Over all, prices continued to rise. The average new low-rise home in the GTA went for $487,840 in June, up 2 per cent from the previous month and 11.2 per cent from a year earlier. The average new high-rise suite cost $426,252 in June, up about 0.6 per cent from the previous month and 9.6 per cent from June, 2009.

Take away the impact of the harmonized sales tax, which added 8 per cent to the price of homes over $400,000, and the year-to-year increase did not look all that bad.

What a closer examination of all the facts and figures showed is that the biggest sales in high-rise condos are recorded during the days following the launch of new projects. In the high-rise category, more than 50 per cent of the month’s sales can be attributed directly to new launches, says George Carras, president of RealNet Canada Inc., which tracks these things.

The same cannot be said about low-rise homes. There were eight new launches of detached, semi- and townhouse projects in June, but sales among them only accounted for 14 per cent of the month’s total.

Mr. Carras says eight launches is not a lot of product and that may skew the statistics. He also says there would have been quite a few more new projects launched in June but delays in municipal approvals last spring caused builders to shelve launch plans until the peak buying months of fall.

And what of rising prices? As he sees it, the GTA has a lot of unsold high-priced houses and their numbers may be skewing average prices.

“The homes that really moved well in June were in the lower end of the price range,” he says. “Those starting at $750,000 and running up to well over $1-million just didn’t find buyers. When you have a lot of them on the market still unsold, that can drive the average price up.”

He points to Beaverbrook Homes’s relaunch of University Square in North York. The project originally had a mix of freehold and condo semi- detached homes and townhouses. Prices ran from $393,990 to $399,990.

When Beaverbrook found buyer resistance it eliminated the semis, renamed the project Yorktowns and relaunched with 12 different models of freehold-only townhouses. It dropped prices to as low as $344,990 but also added upscale towns selling for as much as $514,990.

“That seemed to do the trick,” Mr. Carras says. “What I think it shows is that to be successful these days you have to be extremely sensitive to what people want and to price your homes accordingly.

“You can no longer take an ‘if I build it they will come’ philosophy.”