News

House Prices are Shifting Higher in U.S.; Maintaining Strength in Canada

0 2796 Market Intelligence

In the U.S. new homes market in December 2012, the number-of-months of completed but unsold inventory was 4.9, indicating a decent demand-supply balance. The most up-to-date information is set out in a joint press release from the Census Bureau and the Department of Housing and Urban Development.

In the U.S. new homes market in December 2012, the number-of-months of completed but unsold inventory was 4.9, indicating a decent demand-supply balance. The most up-to-date information is set out in a joint press release from the Census Bureau and the Department of Housing and Urban Development.   

The number-of-months inventory is calculated as follows. At any given time, the total number of unsold homes (151,000 units in December) is divided by the current monthly sales rate (369,000 units SAAR/12 = 30,800 units). (SAAR stands for seasonally adjusted and annualized.)

The U.S. inventory of unsold new homes has returned to a level about where it should be. In January 2009, it was at a record high 12.2 months (i.e., slightly more than a year).  

The most recent low point for new-homes inventory was November 2012’s 4.5 months. During almost all the other months of last year – January was the only exception – the “stockpile” ranged from 4.7 to 4.9 months.

November’s 4.5 figure was so tight due to a special reason. The number of units sold that month increased dramatically. Originally, the level of sales reported for November was 377,000 units SAAR, not far out of line with recent history. However, that figure has since been revised up by 22,000 units to 398,000 units.

One has to wonder if December’s sales figure of 369,000 units won’t be similarly “corrected” when January’s report is published.  

U.S. new home starts in December 2012 were 954,000 units SAAR, which was +12.1% versus November 2012 and +36.9% when compared with December 2011.  

The U.S. new homes market is obviously rebounding nicely.

What about the existing or resale homes market? According to the National Association of Realtors (NAR), existing home sales in November were 4.94 million units SAAR, an increase of 12.8% versus November 2011’s 4.38 million units.

A key indicator of the health of residential real estate is prices. In the U.S., there are three agencies that publish existing homes sales prices, each basing their calculations on a somewhat different set of criteria.

According to the NAR, the national median existing-homes sales price for all types of housing in December 2012 versus December 2011 was +11.5%. 

The Federal Housing Financing Agency (FHFA) also provides price data, but derived only from houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac. The FHFA index in November 2012 was +5.6% above November 2011.

There’s also the most widely-followed series, the S&P/Case-Shiller index which covers single-family homes. To achieve consistency over time, its results are based on repeat sales of the same homes. (The S&P/Case-Shiller indices are actually published under agreements between S&P Dow Jones Indices and Fiserv, Inc.)

Case-Shiller’s most recent 10-city composite index was +3.4% year over year while its 20-city composite was +4.3%.

In Canada, the major source of information on existing-home sales is the Canadian Real Estate Association (CREA), which monitors transactions through its multiple-listing service.

According to CREA, the average price of all residential real estate transactions in Canada in December 2012 was +1.6% versus December 2011.

For the 15 major cities highlighted on CREA’s web-site map page, only three registered year-over-year price declines. The largest drop was recorded in Saint John, New Brunswick (-10.7%), followed by Winnipeg (-4.2%) and Vancouver (-0.8%).

The cities with the largest year-over-year price increases were: Regina (+15.9%); Calgary (+6.9%); Saskatoon (+6.6%); Hamilton-Burlington (+6.5%); and Toronto (+6.0%). Halifax-Dartmouth (+5.8%) almost made it to +6.0%.

Victoria (+3.5%) recorded a year-over-year price increase in the existing homes market, but its performance (-2.9%) was the worst among all cities in the new homes market, according to Statistics Canada.  

It’s also worth noting that existing home prices in Newfoundland and Labrador were +11.5% year over year in the most recent December. Energy and mining activity in that province has more than replaced lost output in the fisheries sector. Furthermore, there are major upcoming construction projects in offshore oil development and hydroelectric power.

It’s also fun to compare actual resale home prices across the country. At $684,000 on average, Vancouver was by far the national leader. It was also the only city in the country to record an average sales price that was significantly higher (+43%) than in Toronto.  

Toronto’s average resale home price of $479,000 was about on a par with Victoria at $486,000.

In fourth-place Calgary, the resale home price was 12% below Toronto’s. But its average sticker value ($420,000) in December of last year was still significantly higher than in Edmonton ($329,000).

What are some other interesting regional comparisons? The average resale home price in Saskatoon ($325,000) was higher than in Regina ($318,000), but not by much.  

It’s considerably cheaper to buy an average-priced existing home in Quebec City ($258,000) than in Montreal ($331,000).   

The average price of a resale home in Ottawa ($337,000) is marginally lower than for all existing home sales across the country ($353,000).

I’d like to conclude with a set of numbers provided by the Toronto Real Estate Board (TREB). With a little digging (i.e., a menu “drop-down”), these can also be found at CREA’s web site.

According to TREB, the median price of a single-detached home in Canada’s largest city (by population) in the fourth quarter of last year was $525,000, an increase of 5.0% versus Q4 2011.

The median price of a semi-detached home was $427,700, +6.0% year over year.

For a condo townhouse, it was $318,000 and +4.0% year over year.

And for a condo apartment in Toronto, the median price fell 0.5% to $303,500.

This would seem to be another indication that the city’s hot high-rise condo market may be overstaying its welcome.

U.S. new home inventory – December 2012
U.S. new home inventory – December 2012
Based on seasonally adjusted data (single-family housing).
Data source: U.S. Census Bureau and U.S. Department of Housing and Urban Development.
Chart: Reed Construction Data - CanaData.
Change in Existing Home Sales Prices - Ranking of Cities -
December 2012 vs December 2011
Change in Existing Home Sales Prices - Ranking of Cities - December 2012 vs December 2011
Data source: The Canadian Real Estate Association (CREA) (based on MLS® average sales prices in the month).
Chart: Reed Construction Data - CanaData.
Existing-Home Average Sales Prices - Ranking of Cities -
December 2012
Existing-Home Average Sales Prices - Ranking of Cities - December 2012
Data source: The Canadian Real Estate Association (CREA) (based on MLS® average sales prices in the month).
Chart: Reed Construction Data - CanaData.
Ratio of Existing-Home Sales Prices in Other Cities vs Toronto -
December 2012
Ratio of Existing-Home Sales Prices in Other Cities vs Toronto - December 2012
Data source: The Canadian Real Estate Association (CREA) (based on MLS® average sales prices in the month).
Chart: Reed Construction Data - CanaData.

by Alex Carrick

Leave a comment

Or register to be able to comment.