Canada's Housing Bubble

Feb 17 2010 Greg Quinn Bloomberg

Canadian existing home sales fell for the first time in more than a year in January, the Canadian Real Estate Association said.

Sales declined 2.8 percent to 43,910 units, the Ottawa- based realtor group said in a report. Gregory Klump, the group’s economist, said by telephone it was the first decline since December 2008.

The average resale price was C$328,537 ($314,700) in January, up 20 percent from a year ago, the group reported today. The price increase was exaggerated by a “weakness” in the year-ago month, the report said.

“The resale housing market is becoming more balanced,” Dale Ripplinger, the group’s president, said in the report. “A more balanced market is likely to result in smaller price increases going forward.”

The figures come a day after Finance Minister Jim Flaherty announced plans to tighten mortgage rules and as some investors said the country was in a housing bubble, a view Flaherty rejected. Home prices and resales will increase to records this year boosted by low borrowing costs, then decline in 2011, the Canadian Real Estate Association said in a report last week.