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‘Madness’ as home prices surge in Toronto, cool fast in Vancouver

Briefing highlights

  • Toronto house prices surge as Vancouver cools
  • Wells Fargo shares up after CEO replaced
  • Global markets tumble
  • Windsor rides high as Calgary laid low

Home prices up

The Toronto, Hamilton and Victoria housing markets are still on fire as Vancouver shows signs of angst.

Home prices in Toronto rose 2.2 per cent on a month-to-month basis in September, with Hamilton coming in at 1.4 per cent and Victoria at 1.1 per cent, according to the latest measure of the Teranet-National Bank home price index.

In Vancouver, prices rose 0.2 per cent from August in what was the second month of a new 15-per-cent tax on foreign buyers of area properties.

“The current madness in Toronto’s housing market will predictably be blamed on foreigners, but the near-record 16.4-per-cent increase in house prices over the past 12 months is mainly due to low interest rates and lax lending standards for domestic borrowers,” said Paul Ashworth, the chief North American economist at Capital Economics.

Adding to this in future will be the federal government’s new measures aimed at cooling Canada’s overheated markets.

“In Vancouver, after seven large monthly house price increases in a row, prices were virtually flat in September,” said National Bank economist Marc Pinsonneault.

“This is consistent with the recent loosening in the home resale market, as sales dropped each month since their record level last February for a cumulative decline of 44 per cent,” he added.

“Prices in Vancouver have not fallen so far because market conditions have just started to loosen from the tightest conditions on records.”

National Bank now expects Vancouver prices to sink by 10 per cent over the course of year, with Toronto “now the red hot market,” according to Mr. Pinsonneault.

“But the historically low supply (in terms of the number of homes listed for sale) is also contributing to market conditions that are the tightest on records,” he said, noting the last four months have now seen an average 2.9-per-cent gain in prices.

Across the country, Calgary prices rose 0.3 per cent in Calgary and 0.1 per cent in Winnipeg. Prices were flat in Halfax, and fell 0.4 per cent in Edmonton, 0.6 per cent in Ottawa-Gatineau, and 0.8 per cent in Montreal and Quebec City.

The picture is different on a year-over-year basis, of course.

Vancouver prices are up 24 per cent from a year earlier, Victoria up 17.9 per cent, Toronto up 16.4 per cent, and Hamilton up 13.1 per cent.

Gains are far lower in several other cities, and down in Calgary to the tune of 4.9 per cent, in Edmonton by 0.7 per cent, in Halifax by 0.9 per cent, and in Quebec City by 2 per cent.

Wells Fargo up

Wells Fargo & Co. shares are up slightly after Wednesday’s shakeup at the scandal-ridden bank.

The American bank replaced John Stumpf as chief executive officer with Tim Sloan, a Wells Fargo veteran, after being pounded by the controversy over sales practices.

The move came just before the bank’s latest earnings report on Friday.

Politicians aren’t all that pleased with Mr. Sloan as they had been hoping for someone who would “refresh the corporate culture” at the bank, noted CMC Markets analyst Jasper Lawler.

“He has already courted controversy, saying Mr. Strumpf quitting was an ‘incredibly selfless act when you think about it,” Mr. Lawler said.

“Mr. Sloan’s tenure could end up being pretty short-lived.”

From auto crisis to oil shock

The fortunes of Canadian cities are shifting dramatically, along with their industries.

BMO Nesbitt Burns compared Windsor, Ont., once laid low by the recession-era auto industry crisis, to oil-shocked Calgary, and found a sharp reversal.

As BMO chief economist Douglas Porter noted, the auto centre of Windsor struggled under an unemployment rate that topped 15 per cent during the crisis, for the worst showing in the country.

Riding a string of strong North American vehicle sales, Windsor now boasts one of Canada’s lowest jobless rates, just 5.7 per cent, down four percentage points in a year.

“The unfortunate offset to the comeback in the auto sector is the steep reversal in the energy industry, and the ongoing trauma in Alberta,” Mr. Porter said, citing the fact that Calgary’s jobless rate has just about doubled amid the oil shock to 9.5 per cent.

Looked at another way, unemployment in Calgary sat eight percentage points below that of Windsor in 2009, and is now 3.8 points above.

Mr. Porter’s colleague, BMO senior economist Sal Guatieri, noted in a separate research note that Calgary’s jobless rate is outpacing that of many of its peers.

“Calgary’s unemployment rate is not only the highest among major cities in Canada, it’s relatively high compared with other hard-hit energy-producing regions in the United States,” Mr. Guatieri said. “And, it has risen a lot faster, with no end in sight.”

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