By Garry Marr, Canwest News Service
TORONTO - House prices continue to plummet in the United States, but the consensus in Canada remains that the impact of the downturn will not be as severe here.
Home prices in 20 major U.S. cities are now falling faster than at any point on record, hit hard by increasing foreclosures and slumping sales. The S&P/Case-Shiller index declined 18 per cent in October from a year earlier after dropping 17.4 per cent in September. The gauge has fallen every month since January 2007.
House prices have been falling fast in Canada as well. The Canadian Real Estate Association, which represents 100 real estate boards across the country, said this month that average price of a Canadian home sold in November was down 9.8 per cent from a year ago.
Canadian housing sales also hit a seven-year low last month, according to CREA. It said there were 27,743 sales in November on a seasonally adjusted basis, the lowest monthly level since January 2001. It was a 12.3-per-cent decline from a month earlier.
Michael Gregory, senior economist with BMO Capital Markets, said despite the slowdown in Canada "we won't even come close" to what is happening in the U.S.
He pointed to stronger employment numbers and income growth here as well as banking system that "continues to make mortgages" available to Canadian consumers.
But he cautioned that if unemployment numbers rise in Canada, there will be a larger fallout for the Canadian housing market. "Anyway you slice it, if you don't have a job, you can't get a mortgage and you can't buy a house."
How bad the market in Canada is depends on who you talk to. Some Canadian commentators have called for the creation of a S&P/Case-Shiller index here. It is based on tracking repeat sales of single family homes.
CREA has said the Canadian number is skewed by the fact houses are not selling as fast this year as in 2007 in some of the more expensive markets like Vancouver. Using a weighted national average price for sales on the Multiple Listings Service, it said prices fell only 4.7 per cent last month.
Ted Zaharko, who owns Royal LePage Foothills Real Estate Services in Calgary, said Canadians are following the U.S. too closely and expecting the same market conditions to happen here.
While prices and sales continue to fall in Calgary, he figures the market has bottomed out in the city that surpassed Toronto as the second-most expensive place to buy a home during this housing cycle.
"We have people putting ridiculous offers in on a home and nobody is selling. People are saying ‘l'll wait for prices to drop.' It's not going to happen," says Zaharko.
Prices were down 4.2 per cent in Calgary in November from a year ago, according to CREA.
The U.S. survey found all 20 cities with decreasing prices in October, led by a 33 per cent drop in Phoenix and a 32 per cent in Las Vegas. The 20-city index is down 23 per cent from its 2006 peak.
"We're seeing a shift to a housing market that is driven by a poor economy rather than a housing market that's driven by oversupply," said Guy Lebas, chief economist at Janney Montgomery Scott LLC in Philadelphia. "The credit problems that hit in October exacerbated the speed of it."
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