Housing market remains sound
By Kathy McCormick, Calgary HeraldFebruary 7, 2009
To paraphrase Charles Dickens, it may not be the best of times, but it's not the worst of times, either.
Calling today's economic turmoil "unprecedented times," the Bank of Montreal's senior economist and managing director said, nonetheless, "it's not the Great Depression."
In fact, "my feeling is that the U. S. recession will be officially over by September of this year, and stocks will bottom out before the recession ends," Michael Gregory told more than 600 members of the Canadian Home Builders' Association-Calgary Region at a recent economic forecast,
Additionally, the Canadian economy will fare better, he said.
"Canada's recession will be shorter and shallower than many countries, including the U. S."
He's predicting that Canada will start to see positive growth by the third quarter of this year.
That's the good news.
The bad news: the recovery won't be fast.
"Even when the recovery starts, it will be slow and sluggish. Even globally, it won't be as robust."
By this time next year, he's predicting that "no-one will be talking about the recession, but they'll be lamenting on how slow and fragile the recovery is--one to two per cent growth for a while."
Canada will fare better than the U. S. for two reasons--the Canadian banking system and our housing markets.
"Canada's housing market is much more fundamentally sound," says Gregory.
"Canadians have increased debt, but also increased assets. Equity in homes is hovering at 70 per cent, so when prices fall, it doesn't create economic convulsions where consumers are mortgaged to the hilt. That will be a cushion for the downturn."
In Alberta, "prices increased 40 to 50 per cent" in a short time, leading to some of the most expensive housing in Canada.
"That has cooled quite considerably, but it hasn't crashed--and it's not a bad adjustment."
Canadian banks, too, "are still healthy," he says.
However, credit conditions have tightened up everywhere and that won't reverse until the U. S. economy pulls out of the recession by the end of the year and there is a stabilization and modest improvement in commodity prices, says Gregory.
"So it will be the end of this year or early 2010 before it becomes easier."
Meanwhile, over at the Urban Development Institute, residential land developers and related businessmen were hearing what another economist had to say.
"There needs to be a return of consumer confidence before things will get better," says Adam Legge, vice-president and chief economist with Calgary Economic Development.
"Liquidity is the oil that greases the gears of the economy," says Legge, noting that even when things turn around, "it will take three to five years before economic growth is at the three to five per cent mark each year."
Even so, Calgary is in the best position.
"There is a strong labour base, and there is still demand. Calgary is the energy capital and it has a head office economy. There are a number of multi-year projects to keep construction workers and investment here; and the Canadian banking system has strength and stability."
To paraphrase Charles Dickens, it may not be the best of times, but it's not the worst of times, either.
Calling today's economic turmoil "unprecedented times," the Bank of Montreal's senior economist and managing director said, nonetheless, "it's not the Great Depression."
In fact, "my feeling is that the U. S. recession will be officially over by September of this year, and stocks will bottom out before the recession ends," Michael Gregory told more than 600 members of the Canadian Home Builders' Association-Calgary Region at a recent economic forecast,
Additionally, the Canadian economy will fare better, he said.
"Canada's recession will be shorter and shallower than many countries, including the U. S."
He's predicting that Canada will start to see positive growth by the third quarter of this year.
That's the good news.
The bad news: the recovery won't be fast.
"Even when the recovery starts, it will be slow and sluggish. Even globally, it won't be as robust."
By this time next year, he's predicting that "no-one will be talking about the recession, but they'll be lamenting on how slow and fragile the recovery is--one to two per cent growth for a while."
Canada will fare better than the U. S. for two reasons--the Canadian banking system and our housing markets.
"Canada's housing market is much more fundamentally sound," says Gregory.
"Canadians have increased debt, but also increased assets. Equity in homes is hovering at 70 per cent, so when prices fall, it doesn't create economic convulsions where consumers are mortgaged to the hilt. That will be a cushion for the downturn."
In Alberta, "prices increased 40 to 50 per cent" in a short time, leading to some of the most expensive housing in Canada.
"That has cooled quite considerably, but it hasn't crashed--and it's not a bad adjustment."
Canadian banks, too, "are still healthy," he says.
However, credit conditions have tightened up everywhere and that won't reverse until the U. S. economy pulls out of the recession by the end of the year and there is a stabilization and modest improvement in commodity prices, says Gregory.
"So it will be the end of this year or early 2010 before it becomes easier."
Meanwhile, over at the Urban Development Institute, residential land developers and related businessmen were hearing what another economist had to say.
"There needs to be a return of consumer confidence before things will get better," says Adam Legge, vice-president and chief economist with Calgary Economic Development.
"Liquidity is the oil that greases the gears of the economy," says Legge, noting that even when things turn around, "it will take three to five years before economic growth is at the three to five per cent mark each year."
Even so, Calgary is in the best position.
"There is a strong labour base, and there is still demand. Calgary is the energy capital and it has a head office economy. There are a number of multi-year projects to keep construction workers and investment here; and the Canadian banking system has strength and stability."
Labels: Housing Market
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