BMO’s Porter: Housing market has finally “found a floor”

The market is exhibiting a steady increase in strength over the past few months

BMO’s Porter: Housing market has finally “found a floor”

All available data indicates that the Canadian housing market has finally “found a floor,” according to Doug Porter, chief economist and managing director of economics at BMO.

Latest numbers from the Canadian Real Estate Association showed that home sales grew by 11.3% monthly in April – and while activity was 19.5% slower on an annual basis, CREA said that the degree of slowdown was far less than it was just a few months ago.

“Canadian housing activity found a serious spark in April, with both home sales and new homebuilding rebounding from somewhat soggier levels in the opening months of 2023,” Porter said.

This was accompanied by a 22% surge in housing starts in April, reaching a “solid” pace of 261,600 units.

“That marks the highest level of starts since last November, and brings them back up to near last year’s sturdy average pace,” Porter said. “After appearing to cool in the opening months of the year, new home building is also showing some signs of surprising resiliency.”

Taken together, these trends are significantly reassuring for the housing market’s prospects this year.

“The snapback in sales, the firming in prices, and the bounce in starts in April all suggest that the housing market has found a floor,” Porter said. “Some clarity on the interest rate front has no doubt played a major role, as has the underlying resiliency of the economy itself (highlighted by the persistent strength in jobs).”

At the same time, these developments could also give the central bank the ammunition it needs should it decide to reconsider its current policy approach.

“If housing – the most interest-sensitive and cyclical sector of the economy – is showing a renewed pulse, it begs the question of whether monetary policy is nearly tight enough,” Porter said. “While we don’t look for further rate hikes by the Bank of Canada, renewed strength in housing certainly aims the risks squarely in that direction.”