Sales and prices of existing homes in Canada fell in June, the Canadian Real Estate Association (CREA) said on Monday, adding to recent data that has signaled the country’s long real estate boom is starting to fade.
Home resales dropped 1.3 percent in June from May, and from a year earlier they were down 4.4 percent. It was the first year-over-year fall since April 2011, the industry group for Canadian real estate agents said.
More than half of the local markets that CREA tracks across the country reported a year-on-year drop in the number of sales in June, with Vancouver and Toronto, which have been the hottest markets, both declining.
The average price for homes sold in June was C$369,339 ($362,097) on a national basis, down 0.8 per cent from the same month last year, with Vancouver prices falling 13.3 percent from June 2011.
But CREA said prices stayed vibrant in some markets, rising in Calgary and staying strong in Toronto. CREA’s recently launched MLS home price index, which tracks home price trends in just five major markets, rose 5.1 percent in June from May, with most gains coming in those two cities.
The number of newly listed homes climbed 1.4 percent from May.
“Today’s report provides more evidence that the housing market is beginning to come down to earth,” said Francis Fong, an economist at TD Economics.
“The pace of activity in the market over the past few years was simply unsustainable given the economic backdrop, and was mainly being fueled by the record low level of interest rates.”
Fong, however, said signs continue to point to further moderation in housing activity in the near term.
“TD Economics continues to expect declines in both sales and prices of 10-15 percent from current levels over the next 3 years,” he said.
He noted such a contraction would only bring the average price down to its mid-2009 level, essentially unwinding the imbalance that has developed due to a low interest rate environment.
The latest statistics reflect activity before a government tightening of mortgage rules, aimed at cooling the market, came into effect last week.
Many economists and realtors believe the soft landing that policymakers have sought to engineer is starting to take shape. The slowdown comes after a robust, three-year climb in Canadian home prices and booming construction of condominiums.
“Even before the new mortgage rules kicked in, all signs suggest that the Canadian housing market was already cooling — the new rules will simply pull hard on a closing door,” said Doug Porter, deputy chief economist at BMO Capital Markets, in a note to clients.
Gregory Klump, CREA’s chief economist, said home buyers didn’t rush their purchases before the mortgage-rule changes came into effect.
“It will take some time before the compound effect of previous and recent changes to regulations on Canada’s housing market becomes apparent,” he said.
Canada did not experience the housing market crash during the financial crisis that helped drive the United States and other Western countries into recession.
While the market did retreat in 2008, it rebounded swiftly on the back of the low interest rates. The boom, however, has worried policymakers, who have feared the formation of an asset bubble.
CREA said on Monday it will would produce only one statistical release each month from now on, combining its national figures with its five-market MLS Home Price Index.
Fong said the move will adjust for changes in the sales mix so that the data is less susceptible to factors such as very expensive homes, which can skew data.
“If you have a structural change in the kinds of homes that are being sold in a particular month then that really messes up your home price data,” he said.
“We’re seeing sales activity taper off, but prices I think are still generally elevated.”