Skip to main content

Week ahead: When a 10-per-cent tumble in Canadian home sales is a ‘solid improvement’

After a difficult start to the year, the housing market is showing signs that conditions are broadly stabilizing.

— Benjamin Reitzes, Bank of Montreal

Expect to see a hefty drop when the Canadian Real Estate Association releases its June sales report Monday.

It just won’t be as hefty amid a more stable showing, though housing markets across the country are reporting much different pictures.

“After a difficult start to the year, the housing market is showing signs that conditions are broadly stabilizing,” said Benjamin Reitzes, BMO’s Canadian rates and macro strategist.

Story continues below advertisement

“Despite the less negative overall picture, the market remains highly segmented,” he added in a report on what to expect when the June sales and price tallies roll in.

With some local real estate boards already having released numbers, Mr. Reitzes projected the CREA report will show sales down 10 per cent from a year earlier, compared with May’s annual plunge of 16.2 per cent.

He also forecast the report will show average prices down 2 per cent over the year, compared with May’s loss of 6.4 per cent. The MLS home price index, which is considered a better measure, is expected to show a gain of 1 per cent for the second straight month.

As for the regional picture, Mr. Reitzes noted that British Columbia, and Vancouver, in particular, continue to “struggle” amid B.C.’s measures and the federal bank regulator’s six-month-old mortgage rules.

The Prairie provinces are “also struggling to gain any traction,” even as oil prices are much stronger as measured in Canadian dollars, though their housing markets may perk up if crude stays at current levels.

“Toronto is right in the middle, with sales and prices stabilizing after a big early-year pullback,” Mr. Reitzes said.

“And Montreal and Ottawa, which have been particularly strong this year, cooled a bit, as well, in June.”

Story continues below advertisement

The most recent reading of the Teranet-National Bank home price index, also for June and released last week, suggested some stability, rising 0.9 per cent from May and 2.9 per cent from a year earlier.

There’s a but with that.

“With June’s rise, the composite index just recovered the ground lost during [the second half of] 2017,” said National Bank senior economist Marc Pinsonneault.

“June’s rise in the index, impressive at first sight, was in fact weak for this time of the year. Indeed, if the index were purged from seasonal patterns, it would have been about flat over the last three months.”

Of course, there are home-type factors to consider along with regional ones.

Condominium prices, for example, have sizzled while those for other types of home have “held their ground,” Mr. Pinsonneault said.

Story continues below advertisement

Read more

The rest of the calendar:

MONDAY: TAKING STOCK

Key will be how markets see the second-quarter earnings season progressing, with a handful of U.S. banks having reported on Friday and more companies to come this week.

On tap are Bank of America Corp., BlackRock Inc. and Netflix Inc.

“The U.S. earnings season is now getting under way, and expectations are that it is going to be another strong one,” BMO senior economist Robert Kavcic said.

“S&P 500 operating earnings are expected to rise a hefty 21 per cent, year over year, in Q2, according to Thomson Reuters’ tally, down only modestly from a 27-per-cent print in the prior quarter,” he added.

“In fact, this recent run of growth is the strongest we’ve seen since the economy was jumping out of recession in 2010, one trend that flies in the face of various other measures flashing late-cycle warnings. And, keep in mind that a burst in revenue growth has driven much of the recent acceleration, not cost cutting.”

Markets are also watching for the report on U.S. June retail sales, expected to show a rise of 0.5 per cent or 0.6 per cent.

“This report should cap the strongest quarter for retail sales growth postrecession, leaving consumption as one of the main catalysts behind the above-4-per-cent growth expected in Q2,” Katherine Judge of CIBC World Markets said.

And you just can’t go a day without some news on the trade-war front. So watch as the euro zone reports what’s expected to be a modest increase in its May trade surplus.

TUESDAY: THE FED

Federal Reserve chair Jerome Powell kicks off two days of testimony to Washington committees. Markets will be watching, but the central bank has already had ample opportunity to fill investors in on the outlook.

Federal Reserve chair Jerome Powell.

Jacquelyn Martin/The Canadian Press

“We are most interested in understanding how Powell will assess whether policy rates have reached neutral, but given Powell’s interest in reducing forward guidance, we do not expect to learn much on this front,” Citigroup strategist Andrew Hollenhorst said.

“Rather, Powell will probably recapitulate his recent talking points: The economy is in a ‘good place,’ trade issues present downside risk and for now gradual rate hikes remain appropriate.”

Watch, too, for what the central banker says about the Trump administration’s protectionist agenda.

“Powell will presumably temper his criticism of Trump a little, but is sure to repeat the warning included in the minutes of the last [Fed] meeting that trade uncertainty could already be weighing on investment,” Paul Ashworth of Capital Economics said.

Tuesday also brings Statistics Canada’s monthly report on manufacturing sales, which Toronto-Dominion Bank economists expect to show a gain of 0.5 per cent in May, buoyed by a pickup in the energy industry but held back by an auto sector that suffered supply problems.

“Outside these two industries we look for a broad advance in activity, consistent with robust survey data,” they said. “However, real manufacturing sales should see little change after accounting for the rise in factory prices.”

On the corporate front, watch for results from Goldman Sachs Group Inc., Johnson & Johnson, and Charles Schwab Corp.

WEDNESDAY: SOME BIGGIES

Some big earnings on tap, including those from Alcoa Corp., American Express Co., Canadian Pacific Railway Ltd., IBM, Kinder Morgan Inc. and its Canadian arm, Morgan Stanley and U.S. Bancorp.

THURSDAY: TARIFFS

U.S. Commerce Secretary Wilbur Ross starts two days of hearings on potential auto tariffs, which should get Canada’s blood boiling given Ontario’s reliance on the sector.

Earnings: Microsoft Corp., Rogers Communications Inc. and West Fraser Timber Co., among others.

FRIDAY: SHOPPING

Observers expect Statistics Canada to report that retail sales climbed by between 0.7 per cent and 1.2 per cent in May, and that consumer prices rose by up to 2.5 per cent in June from a year earlier.

“After harsh weather conditions kept shoppers away in April, early indications suggest that the following month saw sales speed ahead, led by a strong rebound in car purchases,” CIBC’s Royce Mendes said.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter