Construction Forecasts

News & Analysis

U.S. Home Resales Brought Smiles In April

05/23/2012 by Alex Carrick, RCD Canadian Chief Economist

The National Association of Realtors (NAR) has just provided more evidence of a slightly improving U.S. residential real estate market.

Existing home sales in April were +3.4% month over month, reaching a level of 4.62 million units seasonally adjusted and annualized.

The year-over-year gain was an even more impressive +10.0% versus last April’s 4.20 million units.

NAR’s grand total figure includes single-family, townhouse, condo and co-op properties.

Furthermore, the sales gain in the latest month was said to be broadly based across regions.

Affordability has remained exceptionally strong. Early in May, the 30-year fixed rate mortgage dropped to 3.79%, its lowest level since record keeping began in 1971.

Freddie Mac is the authority when it comes to monitoring mortgage rates.

The share of total sales involving distressed homes (both foreclosures and “short sales”) has fallen from 37% at this time last year to 28% in the latest numbers.

Such properties are usually sold at deep discounts. In a “short sale”, the creditor agrees to accept less than the full amount of the debt outstanding - hence the term “short”.

It generally cuts down on legal and other fees. It’s also a more pro-active approach than waiting for eviction.

Plus, there’s another advantage for home dwellers who are down on their luck. A short sale is usually less damaging to a debtor’s credit rating.

The decline in such transactions as a share of the total is providing some support to prices.

April’s median resale home price – i.e., the point at which half the transactions occurred at a higher value and half lower – was +10.1% when compared with the same month last year.

The NAR report goes on to say that some urban centres in the U.S. have a tight inventory of properties for sale. Specifically mentioned are Washington, D.C. (the seat of government); Miami; Naples, Florida; North Dakota (which is enjoying an energy sector boom); Phoenix; Orange County, California; and Seattle (where some technology firms are flourishing).

By type of structure, the existing homes market is exhibiting a pattern similar to what is occurring with new homes. Multiples are doing better than singles.

Single-family home resales were +3.0% month to month in April and +9.9% year over year.

Condo and co-op sales were +6.0% month to month and +10.4% versus April of last year.

An improvement in existing home sales is a prerequisite for a solid pick-up in the new homes market.

In turn, stronger housing starts will lift employment in construction, which has largely remained in the doldrums south of the border.

In Canada, construction employment has been on much firmer ground. Strong home starts have been a major factor.

The table included with this report highlights provincial construction markets – both according to the year-over-year percentage change in the number of jobs and the unemployment rate.

The figures provided by Statistics Canada are not seasonally adjusted.

Strength in the numbers generally comes housing starts that continue to be high and/or a surge in resource projects.

Alberta is the prime example of the latter factor. The return of the energy patch has made that province’s construction unemployment rate the lowest in the country, at 4.3%.

Furthermore, Alberta’s jobs increase, at 9.5% year over year also stands up very well. With the exception of Newfoundland (+18.6% for jobs, but a miserable unemployment rate of 24.2%), only Saskatchewan (+18.8%) is creating jobs faster in the industry.

Employment in Construction, Canada and Provinces
(based on not seasonally adjusted numbers)
Provinces and canada Employment
Change
(Apr 2012
vs Apr 2011)
 
Unemployment
Rate
(April 2012)
Newfoundland and Labrador 18.6% 24.2%
Prince Edward Island -2.2% 22.4%
Nova Scotia 2.8% 17.0%
New Brunswick -5.0% 20.2%
Quebec 7.8% 14.1%
Ontario 4.3% 8.9%
Manitoba 2.0% 7.8%
Saskatchewan 18.8% 6.2%
Alberta  9.5% 4.3%
British Columbia -4.9% 6.1%
Total Canada  4.5% 9.5%
Data source: Statistics Canada/Table: Reed Construction Data – CanaData.

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