[Financial Post – June 3, 2020]

Rays (plural) of good news are piercing through the gloom surrounding the Canadian economy.

And not surprisingly, the country’s resilient housing sector is among the first to report a rebound.

Home sales jumped 53.2 per cent in May month-over-month, suggesting that April’s dramatic plunge in sales may have been the market’s low point.

Another crucial statistic was new listings that rose 47.5 per cent during May, compared to April, according to the Toronto Regional Real Estate Board.

The Real Estate Board of Greater Vancouver had also reported on Tuesday that homes sales jumped an unadjusted 34 per cent in May from April, while prices remained flat month-on-month. Benchmark prices rose 2.9 per cent to $1.03 million from a year ago.

Of course, these averages look good as the economy was wallowing in complete uncertainty in April, decimating homes sales and upending market trends.

While home sales in Toronto remain 53.7 per cent lower than May 2019, the decline was less than the 67.1 per cent year-over-year decline reported for April 2020.

“The MLS Home Price Index Composite Benchmark price was virtually unchanged in May 2020 compared to April 2020,” TRREB noted. “On a year-over-year basis, the composite benchmark was up by 9.4 per cent. The average selling price for all home types combined was up by three per cent compared to May 2019 to $863,599. On a seasonally adjusted basis, the average selling price was up by 4.6 per cent month-over-month compared to April 2020.”

A May poll by TRREB showed 27 per cent of the Greater Toronto Area households were looking to purchase a home over the next year, suggesting that sales may improve further in the coming months provided the economy is not adversely hit by new waves of the pandemic.

“As we move toward recovery, the housing sector will be a key driver of growth as consumer confidence increases and more households look to take advantage of very low borrowing costs,” said TRREB CEO John DiMichele.

Investors will also be watching a key metric that indicate where prices are headed next, especially in the pricey Vancouver real estate market.

Sales-to-active listings ratio for May 2020 was 15 per cent in the Vancouver region, detached homes at 13.5 per cent, 18.9 per cent for townhomes, and 14.8 per cent for apartments.

“Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months,” noted the Real Estate Board of Greater Vancouver.

TRREB is expecting prices to remain stable over time, with some possible uptick.

“With home sales and new listings continuing to trend in unison in May, market conditions remained balanced. This balance was evidenced by year-over-year average price growth slightly above the Bank of Canada’s long-term target for inflation,” said Jason Mercer, TRREB’s chief market analyst. “If current market conditions are sustained during the gradual re-opening of the GTA economy, a moderate pace of year-over-year price growth could continue as we move through the spring and summer months.”

Another glimmer of hope that the economy is returning to some form of normalcy has come from the transportation sector.

The Canadian National Railway Co. said it saw a 4 per cent increase in volumes of good shipped in May compared to April.

While the recovery is expected to be slow, it’s a positive sign after shipments hit bottom last month, the company’s chief financial officer Ghislain Houle said Tuesday at the UBS Global Industrials & Transportation virtual conference, according to Bloomberg.

“I think we’re seeing the light at the end of the tunnel,” Houle said. “Hopefully, it will hold.”

Canadian Pacific Railway Ltd. also said it set a new record for shipping Canadian grain and grain products in May, moving 2.80 million metric tonnes in the month.

Finally, yet another sign consumers are ready to put COVID-19 behind them is the 113,224 new light vehicles sold in Canada in May, a 147 per cent jump over April’s sales, according to a report by DesRosiers Automotive Consultants Inc. Still, May 2020 car sales were down considerably compared to the same period last year.

“It’s a measure of the strange times in which we find ourselves in that a market decline of only 44 per cent can seem like a positive sign. However, following the estimated 74.6 per cent decline in April — which sent Canadian new light vehicle sales levels back in time to roughly the early 1950’s — May’s year over year decline can evoke a touch of cautious optimism as the first tentative shoots of recovery spring up from a badly damaged marketplace,” the consultants said in a statement.

“Of course, the ongoing situation remains in flux and an already trying year could prove to have a few tricks left up its sleeves yet,” the consultants warned.

They are wispy green shoots of recovery — but we will take it.