Home sales sit stable in July as prices drop 2%
Published Wednesday, August 15, 2012 10:17AM EDT
Last Updated Wednesday, August 15, 2012 2:47PM EDT
Home sales held steady in July as national home prices declined, according to the latest data released by the Canadian Real Estate Association.
Sales were down just 0.01 per cent in July compared with June, although non-seasonally adjusted sales were up 3.3 per cent last month compared with July 2011, CREA said on Wednesday.
The association reported that national average prices fell 2 per cent to $353,147 compared with the same month a year earlier.
The report shows a gradual cooling in what had been a red hot market.
Home prices are off their peak with month-over-month prices down 0.46 per cent in Montreal, 0.33 per cent in Greater Toronto and 0.74 per cent in Greater Vancouver.
However, CREA said housing slowdowns in Toronto, Newfoundland and Labrador and Edmonton were offset by higher home sales in Calgary, Kingston, Ont. and Chilliwack B.C.
The association said recent changes to Canadian mortgage regulations, which include lowering the maximum amortization period down to 25 years from the previous 30 years and limiting home equity loans to a maximum of 80 per cent of a property’s value, were expected to temper home sales and prices in Toronto and Vancouver.
“The data released today confirms that,” Wayne Moen, CREA President, said in a news release.
“Even so, sales and price trends can be very different from one market to the next, and run counter to national trends,” he added.
Shortened amortization periods means some first-time home buyers could have difficulty qualifying for a mortgage, which could have a ripple effect across the housing market, said CREA’s chief economist Gregory Klump.
“It will likely take more time for move-up buyers to sell their current home,” said Klump.
Francis Fong, an economist with TD Economics, said the flat market in July following four consecutive months of contraction showed that on a trend basis, sales have essentially been flat since the end of last year.
In addition to the changes in lending rules, Fong said the recent slowdown was also "a reflection of a Canadian household that is increasingly wary of taking on more debt" amid stalled job growth in an uncertain global economic environment.
"From an economic risk perspective, the moderation in the resale housing market is a positive development," said Fong. "Slowing the pace of debt accumulation and housing activity now reduces the risk that households will get into financial trouble down the road when interest rates do eventually rise."
Douglas Porter, deputy chief economist at BMO, described CREA’s latest statistics as porridge that “Goldilocks would approve.”
"While sales activity and prices are no doubt simmering down, they are neither too hot nor too cold --perhaps just right," Porter wrote in a report.
However he pointed to large regional differences that remain in the real estate market.
“Toronto has left the too-hot porridge bowl, with sales dipping 4.4 per cent year over year and price increases calming to a just-right pace of 3.9 per cent year-over-year," he wrote.
"Meantime, Vancouver is definitely in the too cold bowl, with double-digit declines in both sales and reported prices, although with average prices of $667,000, it is still easily the most expensive in the country."
The number of newly listed homes fell 3.3 per cent in July compared to June, with declines in more than half of all local markets including Montreal, Toronto, Vancouver, the Fraser Valley, Calgary, and Edmonton.
However, the association reports that the national housing market is balanced with stable sales and fewer new listings.
With files from The Canadian Press