As the COVID-19 spreads and the patient count and death toll grow, economists are slashing their once-rosy expectations for global growth in 2020.
But amid the anxiety, there’s one bright spot in the U.S. that is likely to be immune from the virus fallout. Analysts say the housing market isn’t just domestic in nature. It will also be buoyed by exceptionally cheap borrowing costs, years of pent-up demand, and a residential construction sector that may have finally figured out how to efficiently produce entry-level properties.
“Year after year, through things like the Greek debt crisis I had a theory that home buyers were going to be spooked, and they just shrugged off the news,” said Glenn Kelman, CEO of home brokerage Redfin
“The past few years have made a fool out of anyone predicting higher rates and challenging American exceptionalism. The U.S. economy just keeps on going strong.”
‘The past few years have made a fool out of anyone predicting higher rates and challenging American exceptionalism. The U.S. economy just keeps on going strong.’
Just how ferocious is demand in the housing market?
On his first-quarter earnings call last week, Kelman had this to say: “A Redfin agent just told us about a bidding war with 30 other buyers in a far-flung area outside of Portland, Ore., this month. The property being fought over was a mobile home. This situation can last longer than most realize, as the law of supply and demand works slowly in real estate.”
That is helping to extend what has long been a seasonal business, Kelman told MarketWatch. Anxious buyers are pushing the “spring selling season” earlier and earlier. Investors may start to get a read on that activity this week, which will bring the first housing economic releases of 2020.
On Wednesday, the Commerce Department will report the number of new homes started and permits applied for in January. On Friday, the National Association of Realtors will release data on January sales of previously-owned homes, which make up about 90% of the market.
Kelman isn’t the only observer who expects big things from housing this year. “It will be a tailwind” for the broader U.S. economy, said Mark Zandi, chief economist for Moody’s Analytics.
For Zandi, the state of housing comes down to financing costs. “If we have a 30-year fixed-rate mortgage at 4% or below, we should have a solid market,” he said. “If we have 3.5%, we have rip-roaring growth. North of 4%, the market will fade.”
which was the average in the most recent week, is the sweet spot for the mortgage market, Zandi said.
Kelman said that similar to other exogenous events that manage to at least momentarily surprise markets and keep yields in check, the outbreak of coronavirus may have the unintended consequence of keeping borrowing costs low.
“The coronavirus is sort of a dark irony helping out housing,” Zandi told MarketWatch. “It’s keeping rates down as global investors come piling into the U.S. but it’s not hurting our economy to the point where it’s costing us jobs,” he said.
Zandi and others emphasize that it’s still too soon to know anything about the true impact of the infectious disease, but as Kelman put it, the housing market won’t turn down on a dime. “Do I see any storm clouds on the horizon? I don’t. But is it going to rain? I know it will,” he told MarketWatch.
And for now, Americans may be mostly oblivious about the angst swirling through financial markets. On Friday, a closely watched measure of consumer confidence roared past economist expectations to match a near-15-year high. Only 7% of survey respondents mentioned the coronavirus in early February. It’s too early to know whether that means Americans aren’t very aware of the situation – or that they are brushing it off.
Still, as Kelman put it, the decision to buy a home is the most “macro-sensitive” purchase there is. Americans can put off clothing purchases or dine in rather than visit restaurants, but they know once they buy a home, they are making a 30-year commitment — and yet are still out in force touring open houses.
Builders may also finally start to make a solid contribution to economic growth: Zandi thinks this could be the first year in a decade in which analysts underestimate the pace of residential construction rather than overestimate it. It’s taken a while, but builders have finally figured out how to make their costs pencil out at lower home purchase points, Zandi noted.
Homeowners are also renovating and redecorating. In the government’s January retail sales data, one of the bright spots was home centers: stores like Home Depot Inc.
Meanwhile, markets closed mixed on Friday, but ended solidly higher for the week, with the Dow advancing 1%, the S&P 500 1.6%, and the Nasdaq 2.2% for the week.
In any case, housing activity has thus far served as a pillar in the economy in its 11th year of expansion, while other areas, like production and corporate investments, have languished, market segments that are likely to remain under pressure as China suffers from COVID-19.
Next week, may help to determine whether that trend holds up.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
