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Where house prices really stand

We got a better picture today on how well Canadian house prices are holding up. According to the Teranet-National Bank House Price Index (TNHPI), as reported in a Dec. 31 communiqu, Canadian home prices rose 2.1% over the twelve months to October, 2008. This reading contrasts sharply with the year-over-year drop of 10% reported by the Canadian Real Estate Association (CREA) just before Christmas (with its questionable methodology).
While the situation isnt as dire as CREA data would have us believe, things are slowing down in the housing market. The year-over-year change in the TNHPI hasdeclined since the start of 2008, when it stood near 10%. Indeed, on a month-to-month basis, the index is down 1.1% between September and October.
Here is a breakout by city. Ottawa is the only city yet to show deceleration. Calgary is the only one with a yearly decline. Vancouver and Toronto are showing faster deceleration and are getting closer to showing zero or negative yearly changes.

Metropolitan area Index level October-08 % change m/m % change y/y
Calgary 161.37 -1.0% -7.5%
Halifax 120.33 -1.0% 4.0%
Montreal 122.32 -0.2% 5.9%
Ottawa 118.24 0.6% 5.6%
Toronto 114.79 -1.6% 3.0%
Vancouver 147.65 -1.2% 2.7%
National Composite 128.78 -1.1% 2.1%

So far, the Canadian housing market looks like its just going through the typical cyclical downturn where national-level price changes bottom out near zero or slightly below. There is no widespread forced selling due to foreclosures, as exists in the U.S. “Less than one per cent of Canadians are in real trouble with their mortgages,” McGill University economist Tom Velk told CTV News recently.
Of course, it doesn’t help to hear housing doomster Garth Turner (who has another book coming out, in January) say he expects housing prices will plunge another 30 per cent next year, on top of the 11 per cent drop so far this year, to quote a recent CP article. The problem with that expectation is that it is based on a faulty premise, i.e. house prices have already fallen 11%. In fact, they are still above year ago levels.