Canada's Housing Bubble

Jun 16, 2010 Garry Marr Financial Post

Home sales fell by 9.5% in May across the country, according to the Canadian Real Estate Association.

The Ottawa-based group, which represents 100 boards across the county, said sales activity was down in 70% of local markets but it was the Toronto, Vancouver and Ottawa markets that pulled the national number down.

The group says new mortgage rules which make it harder to borrow and kicked in April 19 pushed people to make a purchase ahead of the spring market. Rising mortgage rates were another reason given for the decline.

“May was the first full month in which sales activity was affected by these changes,” said Georges Pahud, president of CREA. “An accompanying decline in new listings and housing starts means these changes are also affecting the supply side, which will keep the market balanced and Canadian home prices stable.”

CREA said May sales fell below April sales, calling it a “departure from the normal seasonal pattern” and proof that people who have purchased in May pushed their decision ahead by a month because of the mortgage rules and the rising rate environment.

Seasonally adjusted new listings, which been rising for eight months and creating more supply, fell 4% from April. New listings hit a four-year in September last year but have been rising since, reaching the second highest level ever last month.

Prices are continuing to rise but the increases are getting smaller. The average sale price of a home across the country reached $346,881 last month, an 8.5% increase from a year ago. It was the smallest year over year increase in nine months.

“Supply and demand has become more balanced in a number of major markets,” said CREA Chief Economist Gregory Klump. “Homebuyers now have more choice and are likely be in less of a rush to purchase than they were recently, so the amount of time it takes to sell a home is expected to rise in the coming months.”

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