Tuesday March 16th, 2010 - New Home Prices Show Slow but Consistent Progress

New sales numbers indicate a slow but steady price increase for new-construction homes in Canada. However, the price gains are not as significant as those reported for resale homes.

The price index for new homes, released March 12 by Statistics Canada, shows a tiny gain of 0.4 percent in January versus December. This growth rate is consistent for the past three months, and also represents growth for the seventh consecutive month.

On an annual basis, homes sales increased a small 0.1 percent, in comparison to a 0.9-percent decrease last December. According to Statistics Canada, the home price increase was the first one on a versus-year-ago basis witnessed since December 2008. The growth is attributable to declines in prices in western Canada that were not as severe in January as they were in preceding months.

BMO Capital Markets Deputy Chief Economist Douglas Porter advised sales prices for new homes have taken longer to recover than those for resale homes. He also commented that the very slight gains in new home sale prices shed doubt on any possible housing bubbles. Porter said that a recovery seems to be in place, but conditions are nowhere near those that represent a bubble.

Data from the Canadian Real Estate Association indicate that resale prices grew nearly 20 percent versus last January to about $328,500. Strongest markets in the January new home price index were St. John’s, N.L., with a 1.7 percent increase and Winnipeg, with a 0.7 percent rise. Toronto and Oshawa, Ontario registered growth of 0.6 percent, and 0.5 percent increases were recorded for Ottawa-Gatineau, Calgary and Saskatoon.

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