Several high-profile statistical reports will provide an update on the state of Canada's housing market this week, giving Canadians a clearer picture of the damage wrought so far by the oil shock.
Canada Mortgage and Housing Corp.'s monthly count of housing starts is set for release Monday morning, providing a glimpse into whether the recent economic turmoil has landed on the doorstep of home builders. That will be followed by a pair of key reports on home prices on Thursday: the Teranet-National Bank index for resales and Statistics Canada's price index for newly built housing.
Economists expect that housing starts slowed a hair in January, to an average estimated rate of about 178,000 annualized, from December's 180,300.
Starts have declined considerably since the middle of last year, when they were near 200,000; at a 180,000 pace, they are probably a bit below the annual rate of household formation in Canada, suggesting a modest contraction of supply as the country's housing market inches toward a long-overdue moderation.
(However, December and January are historically the two slowest months for housing starts anyway, owing to unfavourable construction weather.)
But economists say there is a danger that the January number could come in much lower than expected, given the slow time of year and the impact of the oil shock on key markets, especially in Alberta.
"We think the balance of risks lies toward the downside, given the collapse in the price of oil, which represents a major headwind for commodity intensive regions of the country," Toronto-Dominion Bank said in a report Friday.
Prices are still stubbornly high, with overvaluation across Canada estimated by some experts to be as much as 20 per cent, a conspicuous and continuing risk to the Canadian economy.
Still, they have shown signs of cooling in recent months. The Teranet index declined on a monthly basis in both November and December, though growth for 2014 as a whole, at 4.9 per cent, was the greatest in three years.
The new-housing price index has inched ahead by 0.1 per cent in each of the past three months, but its annual growth rate of 1.7 per cent is near its historical lows.
Economists expect the oil shock to be a mixed blessing for Canada's housing market – or, more precisely, a starkly geographically divergent one. Regions that are highly exposed to the energy business could be in for a rough ride in the coming months, while regions that aren't so beholden to the oil industry are expected to benefit from the lower interest rates that the Bank of Canada delivered to counter oil's drag on the Canadian economy.
Yet so far, the jury is out as to just how severe the impact of oil's dramatic fall has been. While sinking oil prices have certainly hurt the Canadian dollar, economic indicators released last week suggested the broader economy may be holding up better than expected.
Friday's data on the labour market – whose health is a key driver of housing demand – showed surprisingly strong job growth in January, especially in oil-rich Alberta, where major energy companies have been announcing spending and staff cuts.
Meanwhile, residential building permits held steady nationally in December, and rose by nearly 5 per cent in Alberta, suggesting the oil shock hasn't convinced builders to backpedal from their construction plans. Not yet, anyway.
But the numbers out of the Calgary Real Estate Board last week told a much darker tale: Home sales in the country's oil capital plunged nearly 40 per cent in January compared with a year earlier, to their lowest levels in five years, while new listings spiked 37 per cent as panicked home owners rushed to sell.
The sales were 35 per cent below the 10-year average, a dramatic fall for what had been one of the country's hottest housing markets.
The situation was very different in the country's two other residential real estate hotbeds, Toronto and Vancouver, where, in the absence of heavy oil-industry exposure, the recent cut in interest rates promises even more favourable mortgage conditions for buyers.
Vancouver's home sales jumped 8.7 per cent in January from a year earlier, while the average price for a single-family detached home rose to a record $1.01-million. In Toronto, home sales rose 6.1 per cent in January from a year earlier, while prices increased 4.9 per cent.
"Lower mortgage rates won't prevent home sales and prices falling sharply in regions directly hit by the slump in oil prices," David Madani, Canada economist for Capital Economics, said in a report last week. "While they might support housing activity in other key markets, we fear that this will only fuel greater overvaluation, higher household debt and more overbuilding."