Housing prices in the U.S. rose 11 percent in March, the best uptick the country has seen in seven years.
Why should you care?
Because, as Peter Hall noted in Saskatoon recently, the housing market is a bellwether of what’s going on in the American economy.
Hall, who is Export Development Canada’s vice-president and chief economist, said housing indicators in the United States were in balance in December 2012 for the first time since late 2005.
Things are looking up. Last week, it also became clearer that Americans can start paying for houses again because they have jobs. Non-farm payrolls in the U.S. were up 175,000 in May, slightly better than economists expected.
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Obviously, we care about the economy in the U.S., our biggest trading partner. Canada has made significant strides finding new markets over the last few years, but the impact of the U.S. economy on ours is enormous and always will be.
Indeed, Canada’s job numbers for May were also spectacular. The 95,000 jobs represented the second-biggest monthly gain ever, and they were mostly full-time jobs created in the private sector. That gave the loonie a little bump, even though it has been gently falling over the past few months.
It is destined to continue falling. No matter how fabulously Canada’s economy is faring, the big American buck will always do better if its economy is also performing.
In many respects, that’s an upside for our economy, certainly for ex-ports, and that’s huge for agriculture and agri-business.
There may also be new support for a lower dollar: there are rumblings that the new Bank of Canada governor, Stephen Poloz, once of EDC, will be supportive of monetary policy that benefits exports. (He has not said any such thing, but it’s interesting speculation.)
The downside, for some (including me), is that higher interest rates are starting to become a real possibility. If the economy continues to improve, above and below the border, we could well see a hike earlier than the oft-predicted mid-2014 date. With any luck, they will rise as gradually as economic improvement has and not shock people’s finances.
However, higher rates will start altering people’s viewpoints on debt, and that could have an impact on both land turnover and prices.
