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HOUSING: Warnings grow of further weakening in Canada
        (AlbertaIndex, July 16, Wednesday) --- Canada’s housing markets are emitting warning signs of weakening judging from the latest reports of softening prices, declining sales and rising inventory levels to coincide with the spectacular collapse of the US mortgage lenders Freddie Mac and Fannie Mae and banking giant IndyMac Bankcorp.
        Weighed down Alberta, three of Canada’s key housing data for June fell: sales were down by 15 percent to 30,751 units, total dollar volume off by 15.4 per cent to $10.5 billion while the average sale price declined by 0.4 per cent to $341,096. The drop in home prices were the first in almost a decade.

The only key data to show a rise was new listings, which rose by 6.2 per cent to 55,639 units.

In a commentary last week, Peter G. Hall, vice president and chief economist for the Export Development Canada (EDC), said it may soon be “Canada’s turn” to experience a decline in its housing markets following on the examples of the US, Europe and Japan.

He wrote: “Canada has thus far avoided a housing adjustment. Starts are soaring on the strength of the domestic economy and a huge dollop of very well-timed fiscal stimulus. But Canada’s turn may come soon. Although imbalances in the marketplace appear to be small, starts are currently well ahead of requirements, and are unlikely to continue indefinitely at today’s pace.

“The bottom line? Housing markets are in a tailspin in the world’s largest economies, and working off the excesses will take time. They point to persistent global weakness through 2009.”

Belatedly, Ottawa is attempt to rein in excessive lending and borrowing by no longer insuring mortgages with less than 35-year amortization periods and less than five-per-cent down payments as of October 15.

Last month, Scotiabank predicted that Alberta’s real estate would end the decade on a “disinflationary note”.

In a special report, the bank said Alberta’s residential real estate market had clearly passed its peak on multiple counts.

Resale volumes are on target for double digit percentage declines this year over last, on top of last year’s 4% decline.

Prices in Calgary and Edmonton are off by 4% and 5% respectively from their peaks last summer, and sales-to-listing ratios have utterly collapsed from the 80-90% range to the forty range today.

The bank noted that only in Alberta are mortgage delinquencies materially rising over the past year.

“Further increases would coincide with a combination of what over-heated 50%+ price gains in a single year did to stretched borrowers who are witnessing negative equity positions if they bought at the very peak, since most of the market was recently driven by heavily leveraged borrowing,” it said.

“Alberta is the provincial chart-topper for adoption rates of long-amortization mortgages, especially in terms of the longest 40-year products that carry borrower profiles involving next to nothing down to purchase a house, first time experience buying a home and at using credit, and more likely to be single income households.”

The decline in the province’s housing performance is coinciding with a drop in inbound migration.


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