Housing Market - By: gifts

The Canadian housing market gets a few indicators in the coming week, following this past week’s warning from the Canadian Real Estate Association that the residential real estate sector will see a slowdown this year and next.

On Tuesday, Canada Mortgage and Housing Corp. is slated to release housing-start figures for May. On Thursday, Statistics Canada releases its new-home price index for April.

The following week, CREA will release figures on sales of existing homes in May. Some local numbers, such as for Ottawa and Calgary, have already been released, showing some sluggishness.

Both the scheduled housing reports for the coming week deal with the new-home market, which was slower to kick into high gear in the recent cycle than existing home sales. It might well be that the new-home market keeps its momentum a bit longer even as the resale market slows, as economists expect further gains in both the housing-start and new-home price figures.

Housing starts are expected to come in at an annualized rate of 205,000 for May, up from a revised 200,700 in April. It has spent several months close to the 200,000 level, which is thought to be unsustainable in the long term because it easily outpaces Canada’s typical household-creation rate of 175,000 a year.

“In the coming months, with the Canadian economic recovery expected to gain further traction, and still low though rising mortgage rates remaining supportive to housing demand, we expect the recovery in Canadian residential construction to remain largely intact,” Millan Mulraine, senior strategist with TD Securities, wrote in a research note Friday.

“However, a modest correction may occur in the latter part of the year as housing-market activity and starts become better aligned with economic fundamentals.”

The new-home price index is expected to be up 0.3% for April, matching the gain seen in March, and marking the 10th straight month of rising prices in this market.

Besides housing, April’s trade figures are due from Statistics Canada on Thursday. Economists expect a surplus about $700-million to be reported, up from $254-million in March. It would be the seventh straight monthly trade surplus for Canada.

CIBC World Markets economist Krishen Rangasamy said the April surplus might be as much as $1-billion on account of a strong global economy and elevated commodity prices.

“While we’re still well below pre-recession levels in terms of export volumes, the global recovery has breathed new life into Canadian exports, which are up 16% annualized in real terms in the last two quarters,” Rangasamy said in a report Friday. “That trend likely extended to the second quarter.”

However, Rangasamy warned that Canada’s international trade would see headwinds later in the year as the effect of the higher Canadian dollar comes more into play and the U.S. economy slows down.

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