Photo: James Bombales
Strong home sales activity in many of Canada’s largest markets has left housing analysts impressed — even those who have a track record of making bearish forecasts.
In economist-speak, a housing bear (or a bear of any kind, really) is an individual who is pessimistic about the state of the market and believes home prices are going to drop. Just because an economist or investor expressed a “bearish” opinion at one point in time, doesn’t mean they’re forever stuck with the bear label. That said, some economists and organizations are known to be more bearish than others.
Capital Economics, a UK-based research and consulting firm with a Canadian office, is one such bearish firm, known for its often contrarian takes on the country’s housing market.
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In 2017, for example, former Capital Economics senior Canadian economist David Madani had predicted that the Bank of Canada would cut interest rates following a major downturn in the housing market. That prediction ran contrary to the analysis of many other economists and ultimately did not come to fruition, with the central bank choosing instead to hike rates twice that year. A simple Google search of Madani will also turn up many other widely shared predictions of imminent Canadian housing market collapse. It all never really came to pass and while the market has seen some volatility since 2017, it has never truly crashed.
So when a bearish, contrarian firm like Capital Economics is impressed by the performance of Canada’s housing market, it’s definitely worth paying attention to the reasons for its optimism.
In a recent note distributed to Capital Economics’ clients, the firm’s chief North American economist Paul Ashworth made a number of glowing comments about the strength of the market after reviewing Teranet and National Bank’s latest monthly home price data release.
Ottawa and Montreal are “on fire” while Toronto just posted its strongest price gain of the year. Even Vancouver, which has endured some brutal months over the last year, enjoyed a price rebound in September, he writes.
At the national level, home prices saw a 0.1 percent increase between August and September. While that figure probably seems fairly lacklustre to you, Ashworth writes that when adjusted for seasonality, the September increase is actually the strongest monthly bump since January.
And a quick note for those who didn’t follow that: Real estate markets have strong seasons and slow seasons so just looking at one month’s performance won’t always give you a complete picture of the market’s overall health. That’s why it’s helpful for economists to adjust monthly housing figures for seasonality.
Looking ahead into the near future, markets across Canada should continue to rally into the first half of 2020 thanks to the strong rebound in home sales, Ashworth continues.
There will be more detailed analyses of what the 2020 housing market holds as we race toward the New Year (seriously folks, there are holiday decorations up in the stores already). If Ashworth’s unusual optimism is any indication, many other market commentators will be coming out of the woodwork soon to add their upbeat takes to the 2020 predictions pile.