Canadian home sales remain depressed

National home sales activity edged back down in November on a month-over-month basis, says the Canadian Real Estate Association (CREA).

Similar to this past August, demand geared down due to tighter mortgage lending rules. It’s been running about 8% below levels seen in the first half of the 2012.

The number of home sales processed in Canada edged down 1.7% on a month-over-month basis in November 2012.

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Activity only picked up in two-out-of-every-five local markets, including Vancouver Island, Victoria, Chilliwack, Kitchener-Waterloo, and Guelph. Greater Toronto, Greater Montreal, and Greater Vancouver contributed most to the small decline at the national level.

Actual—not seasonally adjusted—activity dropped 11.9% below last year’s levels, and sales were down on a year-over-year basis in three-out-of-four of all local markets, including most large urban centers.

“National sales activity has remained fairly steady since mortgage rules were changed earlier this year, but this stability masks some real differences in trends among local housing markets,” says CREA president Wayne Moen.

“Activity lacks the momentum it had a year ago,” says Gregory Klump, CREA’s chief economist. “Interest rates have remained low and the economic backdrop has remained supportive for housing activity, so that should leave little doubt that recent changes to mortgage regulations are responsible for having cooled activity.”

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A total of 432,861 homes have traded hands over Canadian MLS Systems so far this year, dipping 0.2% from levels reported over the first eleven months of 2011, and 0.8% below the 10-year average for the period.

The number of newly listed homes fell 0.9% month-over-month in November. Greater Vancouver posted the largest decline, with new supply in the area falling to its lowest level in more than two years.

With sales and new listings moving in the same direction and by similar magnitudes, the national sales-to-new listings ratio was little changed at 50.3% in November, compared to 50.7% in October.

The national average price continues to be influenced by compositional factors, such as fewer sales in Greater Vancouver and Greater Toronto. Excluding these two markets, the national average price calculation yields a year-over-year increase of 3.2%.

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However, sales activity overall is expected to be less volatile next year than it was in 2012. In 2013, CREA forecasts it will recede by 2% to 447,400 units.

The continuation of moderate economic, job, and income growth will temper the impact of recent mortgage rule changes, which are not expected to dampen activity much more than has already been felt until interest rates are expected to begin rising in late 2013.

Despite the small downward revisions to the forecast for national sales in 2012 and 2013, activity is still expected to remain within short reach of the 10-year average (2002 – 2011).

The national average home price is projected to rise by 0.3% to $363,900 in 2012, with gains in excess of that in most provinces. The smaller gain largely reflects a decline in sales activity among more expensive housing markets like B.C. and Ontario.

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