After declining significantly at the beginning of the year, the Montréal census metropolitan area (CMA) housing market has been showing signs of picking up for the past few months. This increase in activity on the housing market is coinciding with an improvement in economic conditions, as several indicators are suggesting that economic growth will soon resume. In this environment, the housing market will be relatively stable in 2010, for both residential construction and resale activity.

Economic conditions have substantially improved since the beginning of the year, as the financial crisis is largely over. Governments’ expansionary monetary and fiscal policies allowed for the massive injection of capital that stabilized the financial markets and revitalized the economies.

In Quebec, the economy is showing signs of an imminent recovery, and GDP is expected to grow in 2010. Employment, which tends to start growing again with some lag behind the economic cycle, should pick up slowly during 2010. The number of jobs should fall by 1.3 per cent this year, which should drive up the unemployment rate to 9.5 per cent in the Montréal CMA. After having increased rapidly since the beginning of the year, the unemployment rate has been rising more slowly in the last few months, as employment has stabilized to a certain extent. Even if the worst of the job losses is now over, the labour market will remain anemic, with a small gain in jobs (+0.4 per cent) next year, which will limit income growth and housing demand. In 2010, the unemployment rate should reach 9.6 per cent.

During the period from September 2008 to September 2009, employment in the Montréal CMA declined by 1.1 per cent from the previous twelve months, as around 21,300 jobs were eliminated. The losses were concentrated in full-time jobs ( 1.3 per cent), as part-time jobs rose slightly (+0.1 per cent). As well, the job cuts particularly affected young people aged from 15 to 24 years ( 3.5 per cent) and also people aged from 25 to 44 years ( 1.3 per cent).

The financial sector has been the hardest hit by the job losses for the past year. In the midst of the crisis that shook the financial markets, the companies in this sector cut their workforces by more than 10 per cent in one year. In all, about 15,000 jobs were eliminated in this sector. The improvement of the situation on the financial markets now seems to have stemmed the hemorrhage of jobs in this sector.

A more significant sector in terms of number of jobs, trade–and more particularly retail trade–also registered considerable job losses in the last twelve months ( 7 per cent). In fact, more than 16,000 jobs were eliminated in this sector, but the situation should stabilize over the coming quarters, as economic conditions improve.

After having declined for four consecutive years, employment in the manufacturing sector seems to have stabilized in recent quarters but, with the strong Canadian dollar, the recovery in this sector remains uncertain. The slowdown of the Montréal housing market at the beginning of 2009 sharply affected employment in the construction sector, which had posted two years of solid growth. The massive investments in infrastructure will support employment in this sector in the Montréal area in 2010.

On the real estate front, the Newfoundland Government released their take on Newfoundland housing market conditions. While most of their data is from CREA and previously discussed earlier on this blog, I thought it important to “cut and paste” the PDF of the real estate section from the Economic Research and Analysis website as it recapped and touched on a number of important areas and facts.

Housing market conditions were robust in 2008. Housing starts increased to a level not seen since the early 1990s. Residential sales activity and prices reached record levels. Other capacity indicators like rental vacancy rates are at, or remain near, historical lows. Increased housing demand stemmed from strong economic performance, low interest rates, optimism about future major projects, and household formation.

Housing Starts

During 2008, housing starts totalled 3,261 units, up 23.1% compared to 2007. This was in contrast to activity in the Maritimes and Canada, where starts declined by 7.9% and 7.6%, respectively. While urban areas account for approximately two thirds of housing starts in the province, both urban and rural areas recorded significant gains in 2008. Urban housing starts were up 22.1% to 2,229 units and rural starts were up 25.2% to 1,032 units. Total housing starts are expected to fall to 2,648 units in 2009 as the global recession and slumping housing market in the rest of Canada weakens local consumer confidence. Since 1989, housing starts have averaged 2,333 units per year. Therefore, even with the decline expected this year, housing starts will be at relatively high levels for the local industry.

Residential Sales and Prices

Residential sales activity and prices increased to record levels last year. The number of residential properties sold in the province through the Canadian Real Estate Association’s Multiple Listing Service® (MLS®) during 2008 was 4,695, an increase of 5.0% from 4,471 in 2007.  This performance was in contrast to the national residential market. MLS® sales decreased by 17.1% in Canada and 8.9% in the Maritime provinces during 2008. According to CREA, the number of MLS® sales in the province is expected to decline by 14.8% in 2009 to 4,000.
Strong demand for housing, especially during the summer months, created a buying frenzy in 2008. The average number of active MLS® listings in the province (a measure of housing availability/supply) declined by 38.3% to 1,495 from 2,423 in 2007. Homes were being purchased as soon as they hit the market and sellers were receiving multiple offers — sometimes well above the asking price. As a result of increased demand, housing prices increased. During 2008, the average MLS® residential price was $178,477, an increase of 19.6% compared to 2007. The fourth quarter average MLS® residential price surged 27.2% over the fourth quarter in 2007, representing the only growth market in Canada.
Increased housing demand in recent years is the result of employment and income growth; household formation; low mortgage rates; and a positive business environment, facilitated in part by continued optimism surrounding a number of future major projects. In addition to these factors, industry indicated that demand for residential units was also being fuelled by expatriates living in other provinces and from residents who commute to other provinces for work purchasing property for personal use and/or investment purposes.

Rental Market
Rental vacancy rates are at or near historical lows throughout Newfoundland and Labrador. Vacancy rates in urban areas have decreased from a high of 15.4% in 1997 to just 1.1% in 2008. During 2008, vacancy rates were lowest in the St. John’s CMA (0.8%) and Corner Brook CA (0.9%), followed by Grand Falls-Windsor CA (1.9%), Gander (2.6%), and Bay Roberts CA (4.0%). Although vacancy rates are low, rental prices remain the lowest in Atlantic Canada. In 2008, the average rent for a 2-bedroom apartment in Newfoundland and Labrador was $596 compared to $635 in New Brunswick, $660 in Prince Edward Island, and $795 in Nova Scotia. It is expected that improved labour markets, positive netmigration, higher housing prices, and a lack of new rental construction will keep vacancy rates low and place upward pressure on rental prices.

http://www.stjohnsrealestateonline.com/economy-2009-newfoundland-real-estate-section/

Reviewed by Moishe Alexander, CFC CEO

Also this week,  Re/Max Canada released their Recreational Properties Report.  What they’ve found is:

Generation X purchasers are poised to replace aging baby boomers as the major force in recreational property markets across the country, according to a report released today by RE/MAX.

The demographic shift was noted in the 2009 RE/MAX Recreational Property Report highlighting sales, pricing, trends and developments in 50 Canadian markets. The report found demand from Gen X (those born between 1965 and 1980) has nearly doubled over one year ago. Seventy-four per cent of markets surveyed this year reported a marked trend toward thirty-something buyers snapping up affordably-priced product, ranging from waterfront cottages to resort condominiums, compared to just 40 per cent in 2008.

“After being priced out of most markets for the better half of the last decade, Gen X purchasers now have the financial wherewithal to buy recreational product at virtually every price point,” says Michael Polzler, Executive Vice President, Regional Director, RE/MAX Ontario-Atlantic Canada. “Gen X is ideally positioned to pick up any slack in recreational property markets caused by softer demand from baby boomers and retirees. They represent the next wave of recreational property owners in Canada and they know it.”

The financial strength of the cohort dovetails well with current market realities. Sixty-six per cent of recreational property markets surveyed reported a decline in the number of recreational product sold in the first four months of 2009, while 22 per cent indicated sales were either up or on par compared to one year ago. While the combination of inclement weather and a global recession clearly hampered sales activity earlier in the year, many major centres are currently experiencing an upswing in activity as the traditional cottage season gets underway.

“Much of the activity in the marketplace today has to do with the mindset of this particular generation,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “More important than the investment aspect is the commitment to lifestyle. The purchase of a waterfront home or a condominium is more than a simple transaction to Gen X purchasers – owning a recreational property underscores their dedication to family and balance.”

The time to buy has never been better. With four exceptions, recreational property prices have softened in most major markets across the country. Only on the Newfoundland Coast and in Ontario, from Innisfil to Oro, Kingston, and Beaverton, have values increased this year compared to 2008. Starting prices remain similar to one year ago and in some cases are even higher.

“While buyer’s market conditions exist virtually across the board, sellers of recreational properties from coast-to-coast are clearly content to wait out the storm,” says Polzler. “They are in no hurry to unload their product. Many have held on to their properties for generations – they’re fully-owned yet underutilized, which has prompted some aging owners to list them for sale.”

The report also found that while lowball offers are on the rise, very few meet with success. Through tough negotiations with multiple sign backs, purchasers who are serious tend to find out the hard way that sellers are serious too. As a result, the sales-to-list ratio remains relatively high in most recreational property markets across the country.

“The prospect of greater stability down the road is creating cautious optimism in the marketplace,” says Ash. “Purchasers are seeking to buy quality product, whether it be situated on lakes, rivers, or ponds, before values start to once-again edge up.”

Highlights:
• Supply is adequate in most markets, but heated activity in the lower-end has resulted in tight inventory levels for entry-level product in 18 per cent of markets including: Bancroft, Combermere, Honey Harbour/Port Severn, West Kawarthas, Orillia, Flesherton, North Saskatchewan, and Salt Spring Island.
• Older cottage owners, many who own their properties outright, are selling to younger purchasers with families.
• Some American cottage owners in Canada are taking advantage of the stronger dollar to cash out of the market.
• American purchasers have largely fallen off the radar, with some exceptions: Lake Winnipeg, Shediac Bay, and Sault Ste. Marie.
• Pent-up demand is a factor in the marketplace, as those purchasers who had intended on buying recreational properties in the latter half of 2008 deferred their purchases to 2009.
• Older Canadians continue to seek secondary homes in warmer parts of the U.S such as Florida, Arizona, California, and Nevada.
• Generation X purchasers are prepared to spend their hard-earned dollars on recreational properties, but at the end of the day, they want to know that they’ve negotiated the best deal possible.
• The upper-end has somewhat softened in markets across the country.

The full in depth report can be downloaded here .  I highly recommend giving it a read, as it covers cottage towns all over Canada. If you’d like the names of some great cottage property sales reps, send me an email, I’d love to help!

reviewed by Moishe Alexander, CFC CEO

* Would be first time below 200,000 in seven years

* Existing home sales, prices also seen falling

* Slight rebound seen in 2010

(Adds details)

By Ka Yan Ng

TORONTO, Feb 19 (Reuters) – New home construction in Canada is expected to drop by 24 percent this year as part of the fallout from a slowing economy, but rebound in 2010, the Canada Mortgage and Housing Corp forecast on Thursday.

Housing starts are seen to be about 160,250 units for 2009, down sharply from 211,056 units in 2008, the country’s national housing agency said in its first-quarter Housing Market Outlook report.

The forecast was revised lower from its the fourth-quarter outlook, which predicted in October that Canadian home building would slip to 177,975 units this year.

This would put starts below 200,000 units for the first time in seven years.

Low mortgage rates and a growing economy contributed to a healthy housing market for years. But home construction, a cornerstone of Canadian growth, has steadily declined in each of last four months as the economy felt the bite of the global financial crisis.

“The economic downturn will result in a decrease in demand for home ownership leading to a decline in housing starts and existing home sales in 2009,” Bob Dugan, chief economist for CMHC, said in a statement.

“Housing market activity will begin to strengthen as the Canadian economy rebounds in 2010 and the level of housing starts over the forecast period will be more in line with demographic fundamentals. ”

All 10 provinces are expected to show declines in new home construction this year, it said, led by the Western provinces, each with more than 30-percent drops expected for the year.

Most provinces may see an uptick in home building activity in 2010, with the exception of Quebec and British Columbia.

Existing home sales, explaines Moishe Alexander, as measured by the Multiple Listing Service system used by real estate agents, are expected to decline 14.6 percent during 2009 to 370,500 units from 433,990 units last year. The average home price is expected to fall 5.2 percent to C$287,900 ($230,320) from C$303,607 a year ago.

Last week, data showed sales of previously owned Canadian homes plunged 41 percent in January from a year earlier while prices dropped 11 percent.

Looking to 2010, starts should rise a bit to 163,350 units, CMHC said, while home sales and prices are also expected to climb.

Sales of previously-owned homes are expected to rise by 9.3 percent to 405,000 units in 2010, and the average national home price may inch higher to C$288,100 from the forecasted 2009 level, CMHC said.

($1=$1.25 Canadian) (Reporting by Ka Yan Ng; Editing by Jeffrey Hodgson)