Wednesday, September 28, 2011

Teranet- National Bank House Price Index +1.3%

Canada's housing market continues to defy gravity.  A cursory look at the rest of the planet of those countries that have seen a strong housing market after the 2007 crisis -- China and Australia, are both now facing rapidly slowing market. Yet, for the 4th month running Canadian house prices are up, this time by 1.3% (July) , in June  it was 1.7%.  Canadian house prices are now 12% above the 2008 peak

(Source: national Bank of Canada & Teranet National Bank House Price Index)

What is driving these prices, well mortgage rates have restarted their downward trend of the past 30 years.  We forget that in October 1981 Canadian mortgage rate peaked at 22%, falling almost without interruption (87, and 95 stick out as rises 10% to 14% and 6% to 10%).  Today mortgage rates in Canada are around 5% for the 5 year term (Canada doesn't have the U.S. system of 30 year fixed mortgage), and less than 3% for the 1 year mortgage term.  That's driving the ability of Canadians (who still benefit from rising income) to buy more expensive homes.

The Teranet-National bank index also noted that the market was more or less in balance across Canada with the exception of Toronto where non-resident investors are a major driving force (more so than Vancouver).  Yet lost in all this is the Canadian consumer confidence index -- which is at its lowest (outside a recession period), although much of Canadians view of the economy is colored by what is occurring south of the border, still it remains that the numbers are not bullish for the economy.

The Teranet National Bank Housing Index is the equivalent of the American S&P Case-Shiller Home price index comparing sale price of the same property over time, and takes into consideration improvements...  


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