Canada’s housing market continues to show signs of slowing from the torrid pace set in recent years, but also defying the worst fears of an imminent collapse.
The Canadian Real Estate Association reported Monday that existing home sales in the 26 municipal markets it tracks rose a seasonally adjusted 2.4% in March over the previous month, but were down 15.3% from last year.
That’s an indication that Finance Minister Jim Flaherty’s actions of last summer to tighten mortgage lending, along with home-buying fatigue, are exerting a drag on the market.
But fears that housing was due for a sharp correction remain unrealized as more than half of the local markets saw greater activity, and average home prices — while subject to regional variations — on average rose 2.5% from a year earlier to $378,532.
“The readings today suggest that the Canadian housing market is beginning to thaw out from its regulatory-induced freeze,” said TD Bank economist Sonya Gulati.
Still, Gulati added that she did not expect a rebound from the recent tumbles given that the economy is growing modestly, demand has waned and Canadians are dealing with record high debt levels.
Bank of Montreal chief economist Doug Porter noted that sales in the last four months are down 14% over the past year, but he too saw the slide moderating and that sales will likely only fall by seven per cent through 2013.
As for prices, they continue to defy both gravity and logic.
“Canadian home prices are boring (and that’s a good thing),” Porter wrote in a note to clients. “Notably, all 26 cities reported a single-digit yearly change in prices in the past year, an unusually calm background. Moreover, all major home price measures are displaying unusual uniformity at present — the average and median price are both up between two and three per cent, as is the MLS Home Price Index, as is the new home price index.”
The consensus of economists is that home prices will likely fall about 10% in the next two years, with some believing the correction could be as high as 25%. But while home starts, future building intentions and resales have all fallen in the past year — and especially since Flaherty’s tightening action in July — prices remain stable.
As with all housing data, the latest CREA release showed sharp regional differences.
Overall, the real estate association said there were 39,527 residential properties sold through the Multiple Listing Service in March, compared with 46,669 a year earlier.
Ground zero for the cooling scenario in the report was Halifax, which dropped almost 11% in March from February and 36% from a year ago. At the other end of the spectrum, Edmonton was up 1.6% in the month and 1.4 from a year ago.
On a month-to-month basis, Sales were up in most big cities, particularly Vancouver, which saw a 10.9% jump after seeing among the biggest drops recently, and Regina, up 12.2%.
On an annual comparison, sales in Winnipeg and Regina were down almost 24%, 15% in Calgary, 20% in Toronto, about 19% in Vancouver, about 17% in Montreal, and almost 16% in Ottawa.
The house price index that CREA compiles was up 1.02 percentage points from February and 2.2 points from March of 2012.