March 17, 2010

Carrick: New home prices continued to rise in January

The national home price index reached its peak in the fall of 2008 and stepped down steadily from then until mid-2009, according to Statistics Canada’s latest report for January 2010.

Since mid-2009, however, new home prices have been on the rise again, although they have not quite reached their lofty heights from before the recession. The index has made back about two-thirds of its fall 2008 to summer 2009 decline.

The month-to-month gain (+0.4%) has been the same for the past three months.

Among major urban centres, the highest month-to-month increases in January 2010 were recorded in St. John’s, N.L. (+1.7%), Winnipeg (+0.7%) and Toronto and Oshawa, Ont. (+0.6%). Ottawa-Gatineau, Saskatoon and Calgary all recorded the next level of rapid price increases (+0.5%).

The year-over-year advance in new home prices for total Canada is marginal at +0.1%. The biggest gainers have been Quebec City QC (+6.2%), St. John’s NL (+5.5%) and Winnipeg (+2.1%).

Only two cities are still stuck with large year-over-year declines: Edmonton (-6.5%) and Victoria (-7.3%).

New home prices are moving ahead in the slipstream of rapidly increasing existing home prices.

The Bank of Canada will be raising interest rates most likely by this summer.

Therefore, the fall will be the real test period as to the true underlying strength that exists in the residential real estate market.

-Alex Carrick, CanaData chief economist

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