The rule of thumb among economists is that a recession is defined as two consecutive quarters of negative economic growth.
If that standard applied to housing (and why shouldn’t it?), Canada’s housing market would now be in a recession.
According to the latest data from the Teranet-National Bank house price index, Canada experienced its sixth consecutive month of house price declines in February, with prices falling 0.2 per cent from January.
They’re still higher, though, than they were at the same time last year — by 2.7 per cent, on average.
But with prices declining since last summer, those year-on-year “increases” will probably disappear from the stats soon. Will Dunning, the chief economist for the Canadian Association of Accredited Mortgage Professionals, predicts house prices will start showing annual declines around June of this year.
Like many in the real estate and mortgage brokerage businesses, Dunning lays the blame for the slowdown on Finance Minister Jim Flaherty’s tightening of mortgage rules last summer.
But many critics dismiss this notion, pointing out that Flaherty tightened mortgage rules three times prior to last year’s rule changes, and those policies resulted in only slight blips in the housing numbers.
Some analysts point out certain markets began to slow even before the new rules came into place. They say record high prices and record household debt loads have as much to do with the slowdown as mortgage rule changes.
Flaherty and Bank of Canada Governor Mark Carney have both repeatedly warned that excessive debt taken on by Canadians to pay for record house prices pose a serious risk to the economy.
The February composite index was down 0.2% from January, a sixth straight monthly decline. Prices were down from the month before in seven of the 11 markets. For Hamilton (−0.3%) it was the second consecutive monthly decline, for Calgary (−1.2%) it was the third, for Edmonton (−0.4%) the fourth, for Toronto (−0.3%) the fifth and for Montreal (−0.4%) the sixth. The other two markets in which prices were down from the month before were Victoria (−1.4%) and Ottawa-Gatineau (−0.8%). Prices were up 0.7% on the month in Vancouver, only the second monthly gain in eight months, and 0.8% in Winnipeg, a first in five months. Prices rose 0.9% in Quebec City, to reach a new all-time high for the second month in a row, and 0.1% in Halifax, to match last September’s all-time high.