What if your economy was at a critical juncture, but a vital part of the economic picture was obscured in a fog of inadequate data?
I'm not talking about the lack of October employment numbers from the shut-down U.S. government, which clouded the Federal Reserve's view of the all-important labour market. Thankfully, our American neighbours have put their government back to work, and the data from the Bureau of Labor Statistics are flowing once again to the Fed's monetary policy makers.
I refer instead to a longer-lasting and potentially even more problematic quandary for Canadian policy makers. At a time when the country's biggest economic priority is to delicately stickhandle around a swath of overindebted households and a still-volatile and unpredictable housing market, we're doing so with the aid of opaque and incomplete housing data.
Most key economic statistics in this country are overseen by Statistics Canada, one of the most respected official statistical agencies in the world. Not so for many crucial housing numbers. The monthly count of housing starts comes from Canada Mortgage and Housing Corp., the federal government agency that oversees mortgage insurance and mortgage-backed securities. For home sales and prices, we rely on the Canadian Real Estate Association, the national umbrella group of real estate agents and brokers; it compiles its data from a network of local real estate boards. Statscan handles the monthly building-permits numbers.
The fragmentation of data sources goes beyond the obvious questions about consistency. With the collection of housing indicators coming under increased scrutiny, the concerns have been getting more specific.
Recently, former Member of Parliament and popular blogger Garth Turner questioned whether CREA's system is giving us a distorted count on home sales, due to a tactic among some agents to list properties with several local real estate boards to attract more potential buyers. CREA has also been criticized for delaying incorporating monthly revisions from local boards (for example, to capture apparent sales that fell through) into its national data.
While CREA insists that neither are a problem, the issue has certainly raised the question of whether we are over-estimating the true strength of the housing market. The question takes on more urgency when we see sales numbers like we did this week from the boards in Vancouver (up 38 per cent in October from a year earlier), Toronto (up 19 per cent) and Calgary (up 18 per cent).
Of even bigger concern are the numbers on investment activity in the housing market, particularly among foreigners. They don't exist. Last week, some of the country's top economists raised this issue with federal Finance Minister Jim Flaherty, who has acknowledged that he has no hard data on how much of Canada's housing boom has been fuelled by investors who are looking to make money as property owners rather than acquire personal residences.
The distinction matters a great deal. A substantial downturn in the housing market – say, one triggered by government policy – would trigger a much bigger exodus of investors than permanent residents, and so the risks to the Canadian economy rise with the proportion of investor money pumping up the market. And yet Mr. Flaherty has been crafting policy aimed at cooling the market without that information. The Office of the Superindentent of Financial Institutions has been talking since mid-2011 about uncovering the amount of foreign investment in Canada's real estate market – and yet we still have no visibility.
Cleaning up this muddle of inadequate housing data must be made top priority for Canada's financial and statistical institutions. We can't keep flying blind.
David Parkinson