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Steve Sedgwick
Royal Lepage Noralta Real Estate
3018 Calgary Trail, Edmonton, Alberta
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Thursday, August 13, 2009 - 5 Signs a Housing Recovery Is On The Way

1) Housing starts are expected to rise
While the seasonally adjusted annual rate of housing starts decreased to 132,000 units in July from 137,000 units in June, Canada Mortgage and Housing Corp. says starts statistics – which mark the actual, shovel-in-the-ground beginning of construction – are expected to improve throughout 2009.
The reason?
“Over the next several years, housing starts will gradually become more closely aligned to demographic demand, which is currently estimated at about 175,000 units per year,” CMHC said.
How solid is this foundation? Economists' opinions are mixed.
BMO economist Robert Kavcic said July results indicate a rain delay, rather than a reversal. Unseasonably soggy weather caused “a puddle on the road to recovery,” he said.
However, Toronto-Dominion Bank economist Pascal Gauthier noted that the July results, which were dragged down by fewer starts in the condominium sector, were below expectations.
“The latest data for July is yet another warning that extrapolating the bounce back from [the earlier] extreme lows further out can be overly optimistic,” Mr. Gauthier wrote. 

2) Building permits have bounced higher
This indicator of builder confidence and construction plans has made steady gains.
“Building permits not only held on to the big bounce in May, they were revised higher (to 15.5 per cent) and they rose again in June (up 1 per cent) in another sign that construction is recovering from the extreme lows earlier this year,” the Bank of Montreal said in a research note.
In June, the value of building permits was $5.2-billion, 1 per cent higher than the revised $5.1-billion measured for May. Residential permits rose 0.5 per cent to $2.7-billion, marking the fourth month in a row for an improvement. The increase in permits for single-family homes outweighed the decline in permits for multi-family buildings such as condos.
“While a recent strong uptick in the issuance of building permits suggest some near-term upside to housing starts, activity remains on track with our forecast, which calls for a protracted period of weakness extending to the end of this year, with national starts struggling to break through the 150,000 units level,” TD's Mr. Gauthier said. 

3) Existing home sales soar
Nowhere has the turnaround been more apparent than in July sales of existing homes in Canada's biggest cities, BMO reports.
“For instance, sales in Greater Vancouver were up a massive 89 per cent year-over-year, a world away from a 70-per-cent drop last November. Toronto is a little less frenetic, but managed to post a 28 per cent year-over-year gain in July.”
Edmonton also reported a 28 per cent increase in the number of homes that changed hands year-over-year and, in Calgary, the level of resale activity was up 22 per cent year-over-year.
The Canadian Real Estate Association (CREA) is expected to report further gains in national home resale activity later this week. 

4) It's still a buyers' market, but prices are firming up
Economists expect that when CREA reports on the national picture Friday, the statistics will show that the prices are up about 4 per cent year over year – skewed upwards by sales in the higher-priced markets.
Real estate agents are sleeping with their pagers again with the return of bidding wars in some local markets.
Toronto-based Royal LePage realtor Samantha Hewit, who specializes in condominiums and starter homes for first-time buyers, said four of her listings in the past two months have resulted in bidding wars, and prices are back to last summer's levels.
“We had a super cute condo, a two-story loft…we were asking $269,000. We had 49 appointments in five days and they got $277,000,” Ms. Hewit said in an interview.
BMO reports that new home prices “are a bit slower to turn, and we believe Wednesday's report on that front will show a 3.2 per cent year-over-year decline for June.” 

5) Affordable mortgages
“Nowhere is the benefit of record-low [interest] rates more apparent than in the housing market, where results have jumped 57 per cent in the past five months and look solid again in July,” BMO economist Sal Guatieri said this week.
“The sharp drop in mortgage rates has almost single-handedly returned housing affordability to its long-term norm from the worst levels in 17 years,” Mr. Guatieri said.
Royal LePage's Ms. Hewit agreed that affordability has made a big impact.
“We have a couple of clients right now that have a 3.6 per cent interest rate locked in to the end of September, and they want to buy and close by the end of September,” she said. “They are the ones that are driving the market.” 

Story by Virginia Galt - Globe & Mail
posted in General at Thu, 13 Aug 2009 09:43:04 -0600



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