CMHC, CREA didn’t get the memo

CMHC market update:

CMHC released its Q4 market outlook today.

The report is as predictable as it is boring.  It tows the now often-regurgitated line about home sales declining slightly, home prices declining slightly, and housing starts declining slightly.  A 10 year old could have come up with a similar ‘report’ just by browsing through recent headlines.  Just for fun, though, let’s compare their market outlook from Q2 this year to this most recent outlook.  Let’s see how their position has changed from just a few months ago.

Home sales:

“Sales of existing homesvthrough the Multiple Listing Service®  have slowed so far in 2010.  MLS® sales will begin to rise in the fourth quarter of 2010 through 2011. Overall, 440,300 sales are expected in 2010, followed by 438,400 in 2011.”

I’d be happy to take the flip side of that bet.  I don’t think there will be an increase in home sales at all later this year or next.  In fact I think the recent declines in home sales will continue all the way through next year and beyond.

Back in Q2 they had this to say:

“Overall, 497,300 sales are expected in 2010, followed by 473,500 in 2011.”

With almost 10% lopped of their predictions over a few months it seems that the fine folks at CMHC never saw this current slowdown in sales coming, despite it being painfully obvious that significant demand had been pulled forward. 

Home prices:

“By the fourth quarter of 2010, the average MLS® price of an existing home will be about $333,315 compared to $341,614 in the final quarter of 2009. For 2011, the average MLS® price is expected to move up modestly to $339,800.”

I see they have acknowledged that a home price decline is in the cards….finally after it is painfully obvious to just about anyone.  However, they still expect modest growth in 2011, where I see that year being the first major year of declines.

What did they say back in Q2?

“By the fourth quarter of 2010, the average MLS® price of an existing home will be about $345,500 compared to $341,614 in the final quarter of 2009. For 2011, prices are
expected to move up to $350,800.”

So they knocked over 22K of their fourth quarter prediction and 11K off their 2011 prediction… just a few months!  Nice to see some foresight on their part.

Housing starts:

“We expect starts to be between 176,700 and 194,700 units in 2010 and between 148,000 and 202,300 units in 2011.”

Can you cover your but a bit more?  Pretty hard to comment on this ridiculous estimate except to note that in 2009 net household formation was running at about 175K here in Canada….and that was with the pent-up demand from 2008.  Hard to see how we’ll get over 170K houses built with much demand already met and new reports this week of the significant decline in housing starts in Canada.

What was said back in Q2?

“We expect starts to be between 166,900 and 199,600 units in 2010 and between 148,600 and 208,800 units in 2011.”

You have to give them some consistency marks on this one.  But with a forecast like that, how can you not be right?

It seems that the ‘economists’ at CMHC take current trends and simply extrapolate them into the future and then base their forecasts around that line.  A five year old could do that!  If you’re taking comfort in the fact that CMHC is echoing the mainstream media predictions of a minor drop in both house sales and house prices, keep in mind that they never saw this current slowdown coming.

CREA out to lunch

CREA released their final October numbers today.  Despite sales having fallen 20-40% year over year in the major centres and with Q3 total sales being the lowest in at LEAST 5 years, CREA managed to put on a brave face.

“National resale housing activity rose for the third consecutive month in October 2010”

Ah yes, when year-over-year totals are atrocious, we turn to month-over-month comparisons.  Whatever it takes!

“As further evidence that the market is returning to normal, sales activity in October stood halfway between the recessionary low reached in December 2008, and the record level activity posted in December 2009.”

Gold medal for mental gymnastics goes to CREA chief pumper Greg Klump for this outrageous quote!  So based on the fact that sales are roughly halfway between two arbitrary points, it means that the market is back to normal.  Never mind that concrete comparisons like year-over-year monthly changes or quarterly changes tell the more fitting story.  To wit:

Allow me to highlight the total Q3 sales volume from the past 5 years:

That makes this quote either disingenuous or downright misleading:

“National sales activity rebounded last year without a single monthly decline and hit record levels in the second half of 2009. As a result, large declines in activity compared to year-ago levels are masking recent monthly gains in national sales activity.”

So it only looks bad compared to last year.  Nice try!

I’ve long been predicting that home prices would fall 5 to 10% by the new year.  We’ll see how that plays out over the next couple months.  For now prices remain stable, remaining essentially unchanged over last year.


In fairness to the bull crowd, months of inventory is declining, as it did after the initial sales drop back in 2008-2009, pulling the total market closer into balance though still slightly favouring buyers.


The big question now is whether or not the sellers can remain on strike longer than the buyers.  Anecdotally, I keep an eye on Kijiji in my area and have noticed a pronounced increase in home rentals in the past few months.  Many of them I recognize as houses formerly on the MLS system.  These are the accidental landlords, having tried to sell, they are now resigned to renting for an indefinite period.  How many of them will try to relist in the Spring is the million dollar question.  I have a feeling that we’ll see a marked surge in listings with a continued weakness in sales.

But the ability of home sellers to hold fast to their unrealistically high prices has surprised me in the past.  At the end of the day, this will not prevent the coming correction, only slow the descent.



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4 Responses to CMHC, CREA didn’t get the memo

  1. Couldn’t agree more about CMHC. As a long-time Realtor, I was first alerted to their inability to get it right in the recession of the early 90’s. I came to the conclusion that their forecasts are generally of little use. They should stick to reporting what has happened to protect what little remains of their credibility.

  2. Pingback: Today’s headlines | Financial Insights

  3. Pingback: Who’s the ‘hare-brained’ one? More hot air from perma-bull Jay Bryan | Financial Insights

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