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‘Putrid’: Hey, is that any way to talk about Canada’s housing market?

Briefing highlights

* How economists see housing faring

* A Trans Mountain poem I wrote

* Markets at a glance

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* Goldman Sachs posts stronger profit

* Canadian manufacturing sales rise

* China’s numbers: ‘As good as it gets’

Whither Canadian housing

You’ve got to love how David Rosenberg tells his clients about what’s going on in the world: He pulls no punches, he doesn’t prevaricate, and his daily notes are colourful, to say the least.

The latest, which was actually about the Canadian dollar but segued into the housing market, is just one example.

“One area of the domestic economy where there is a ton of concern, at the central bank level, is housing in the aftermath of the B-20 mortgage regulations,” the chief economist at Gluskin Sheff + Associates said Monday, referring to new mortgage-qualification rules from Canada’s commercial bank regulator.

Remember, too, that interest rates are rising, the B.C. and Ontario governments have moved to tame their housing markets, and the central bank, as Mr. Rosenberg noted, is keenly aware of high household debt levels.

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“We saw some putrid home sales data on Friday, showing March turnover activity slumping 23 per cent from year-ago levels to a four-year low, with average prices down 10 per cent,” Mr. Rosenberg said.

While down from a year earlier, sales were up in March from February, by 1.3 per cent, while the MLS home price index was up 4.6 per cent even as average prices were down.

Other observers agree with Mr. Rosenberg, by the way, though they may choose different words. And it got me thinking that, in the wake of Friday’s numbers from the Canadian Real Estate Association, that it it’s a good time for a look at what analysts are saying:

“The Canadian housing bubble continues to deflate … We expect that all these factors will come to a head in late 2018 and early 2019, leading to several quarters of house price declines. However, in our baseline projection this depreciation is relatively small. Prices stabilize in 2020 and resume increasing in 2021.” Paul Matsiras, Moody’s Analytics

“ The housing market continues to adjust to stricter mortgage rules, recent Bank of Canada rate hikes and some provincial policy moves. While we’re seeing some signs of stability, the adjustment likely has some time yet to go, which is one more reason for the Bank of Canada to proceed cautiously down the tightening path.” Robert Kavcic, Bank of Montreal

“Canadian housing markets are likely to remain under pressure from the recent B-20 regulation, higher mortgage rates, and in some cases provincial regulation. However, lower-priced markets where affordability is good should generally outperform in the current environment.” Michael Dolega, Toronto-Dominion Bank

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“Housing slumps have a nasty habit of becoming self-perpetuating, however, as would-be buyers are scared off by the risk of overpaying and incurring losses. Why take the risk when you can wait a few months until prices have bottomed out which, of course, means that prices will fall further? Nevertheless, in Toronto, the relatively lean number of new listings means that any downward pressure on house prices will be limited.” Paul Ashworth, Capital Economics

“Housing starts remained strong in March, bringing the six-month average to 227,000 units – a solid pace of activity, particularly in light of the cooling seen in existing home sales and prices. Data out [Friday] revealed that existing home sales stabilized in March (+1.3 per cent), following a steep decline in the prior two months. Meanwhile, [MLS] home prices were up 4.6 per cent year on year - the slowest pace in over four years. Hence, despite strong home-building activity, the drop in sales suggests that residential investment will weigh on growth in the first quarter.” Dina Ignjatovic, TD

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Try it yourself

The folks behind this encourage everyone to try it. So I did:

The pipeline was grand

But Kinder Morgan was chafed

So we’ll soon own it

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Markets at a glance

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Goldman posts stronger profit

Goldman Sachs Group Inc. boasted of a strong first quarter, with a trading-driven bump in profit and a dividend increase.

The Wall Street giant said today its profit climbed to US$2.8-billion, or US$6.95 a share, diluted, from US$2.3-billion or US$5.15 a year earlier.

Goldman Sachs also boosted its quarterly dividend to 80 US cents.

“We are well positioned to service our clients as the global economy continues to show strength and central banks unwind certain aspects of policy stimulus,” chief executive officer Lloyd Blankfein said in a statement.

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Factory sales rise

Canada’s manufacturers finally have a decent month to crow about, with a 1.9-per-cent sales jump in February after two straight declines.

Pumped largely by transportation equipment, sales rose in 14 of 21 industries measured, accounting for more than 72 per cent of the sector, Statistics Canada said today.

Inventories climbed 1.3 per cent to a record $77.4-billion, unfilled orders rose 3 per cent, and new orders gained by 5 per cent, marking the third straight month of increase.

“Although growth for the Canadian economy is set to slow down in the first quarter, it may not be the case for the manufacturing sector,” said National Bank economist Kyle Dahms.

“Looking on a quarterly basis, real manufacturing shipments are on track to rise 2 per cent, annualized (assuming no change in March). This follows a +3.6-per-cent reading in Q4 of 2017 and would represent the sixth increase in seven quarters.”

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China: ‘As good as it gets’

China’s economy expanded 6.8 per cent in the first quarter, official numbers today show, but that’s “as good as it gets,” as Société Générale puts it.

“Although we will have to revise up our full-year forecast on the back of the GDP reading (from 6.4 per cent to 6.6 per cent, we still see a slowdown ahead as our predictions of three major trends are indeed playing out,” said Société Gén ’s Wei Yao, noting a weaker-than-expected showing in March alone.

“Export growth has peaked; infrastructure investment growth is trending lower; and, most critically, credit conditions are tightening at an accelerating pace,” she added.

Today’s numbers marked the third consecutive quarter of 6.8-per-cent growth, and “need to be taken with a grain of salt as they have been implausibly stable in recent years,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

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