August 3, 2012
Finding the pearls in the latest U.S. and Canadian economic news
Chief Economist, CanaData
In its latest press release, the National Association of Realtors in the United States reported a month-to-month decline in the volume of existing residential properties sold.
The number of units purchased in June fell to 4.37 million seasonally adjusted and annualized from 4.62 million in May, a drop of 5.4%.
Versus June of last year, however, when the sales level was 4.18 million units, there was a gain in volume of 4.5%.
The headline of the press release — “June Existing-Home Prices Rise Again, Sales Down with Constrained Supply” — made it clear the association wanted to highlight two other factors.
It wished to stress the positive, namely that the supply of properties for sale became tighter in June and resale prices were up year over year.
The inventory of homes available for sale moved little in the month while demand picked up considerably. The number of distressed properties on the market, both foreclosures and short-sales, trended downwards.
First-time buyers are being particularly affected. In periods of normal market activity, the proportion of first-time buyers to total sales is about 40%. In June, their percentage share was only 32%.
It’s the lack of product availability in the lower-price range, plus the difficulty in obtaining mortgage approvals, that is holding back this segment of the market.
The other side of the supply-demand equation isn’t a problem. Pent-up demand has been set free by record low mortgage rates.
The median price (i.e., the point at which half were higher and half lower) of properties sold in June was $189,400, up 7.9% from June 2011.
The last time there was such a large percentage increase across all residential property types — single-family homes, townhouses, condominiums and co-ops — occurred in February 2006, +8.7%.
June marked the fourth month in a row of year-over-year price increase. Since median resale prices are not seasonally adjusted, month-to-month comparisons are not valid.
The median price of single-family homes nationwide rose 8.0% in June. For condos, the price climb was 6.9%.
Regionally, the median price of existing homes sold in the Northeast ($253,700) was highest, followed by the West ($233,300), South ($165,000) and Midwest ($157,600).
The year-over-year median-price percentage changes for those four zones were: Northeast, -1.8%; West, +13.3%; South, +6.6%; and Midwest, +8.4%.
The NAR notes that sales in the West were strongest in the high-price range.
The improvement in the U.S. homes sector of late — housing starts in June were at their best-performing level since October 2008 — will provide an important shot in the arm for the overall economy.
That’s good news. The U.S. needs a vitamin supplement.
The Conference Board’s June leading indicator series retreated 0.3% month to month after advancing 0.4% in May.
According to the Conference Board’s data release, gains in financial, labour and construction-related components of the index were more than offset by retractions in consumer expectations and manufacturing new orders.
The U.S. economy is struggling forward, but it’s fighting strong headwinds originating on the international scene (i.e., Europe’s debt-inspired slowdown).
Meanwhile, in Canada, wholesale trade activity in the latest period, May, rose a solid 0.9% month to month and 6.2% year over year.
The reason this is pertinent is because a large proportion of wholesale trade activity north of the border is conducted with the United States.
The economies of our two nations are still intricately bound together.
The bulk of the month-to-month sales gain in Canadian wholesale trade originated in the computer and communications equipment sector (+7.3%) with support also provided by the motor vehicle (+1.6%) and food industries (+1.4%).
On a year-over-year basis, motor vehicle transactions (+16.9%) were a standout.
For the construction industry, it’s the building material and supplies sub-grouping (+0.3% month to month and +8.0% year over year) that’s of most interest for our readers.
Within building materials and supplies, metal service centres (+19.4%) made a big leap forward in May of this year versus May of last year.
Ontario dominates wholesale trade activity in the country, accounting for nearly half (48%) of the total in the latest period.
However, indicative of the changing industrial structure of the country, the year-over-year improvement in wholesale trade was much stronger in the resource provinces of the West.
Alberta (+16.9%), Saskatchewan (+13.2%) and Manitoba (+11.7%) all recorded double-digit percentage increases to lead the country.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog.
