Toronto, Calgary lead drop in housing sales

Garry Marr, Financial Post · Thursday, Jul. 15, 2010
Existing home sales continued their rapid decline last month, with 70% of markets showing a drop in sales in June from May, the Canadian Real Estate Association says.

But at least one senior executive in the industry says market watchers need a little perspective about the real estate sector.

“The pace we had seen couldn’t be sustained. It’s important to have a word of caution when you talk about it slowing down,” said Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada.

“This is by no stretch a buyer’s market. At best it’s a balanced market in the majority of markets. People are not out there giving their houses away yet.”

Ottawa-based CREA, which represents 100 boards across the country, said sales were off 8.2% from a month ago on a seasonally adjusted basis. Toronto and Calgary led the decline.

CREA said tighter mortgage rules and rising rates were behind a 13.3% drop in sales over the past quarter.

“As expected, these two national factors contributed to a widespread decline in activity, with transactions down in all but a dozen or so smaller markets,” CREA said.

Sales activity was down 19.7% in June from a year ago, when there was a record number of sales for the month.

Actual second-quarter sales were down 2.8% from a year ago but for the year are still up 13.6%.

There was a slowdown in Canadians putting homes up for sale, which should be good for the market and prices. The number of new listings on the market in June dropped 6.8% from May.

But year-over-year price increases are starting to slow. CREA said the national average sales price rose just 4.9% from a year ago to $342,662.

CREA chief economist Gregory Klump said there could be help on the way for prices in the coming months. “While the pricing environment is becoming more challenging, a recovering economy and job market will provide support for housing activity and prices,” he said.

The number of months of inventory in the market, which represents the number of months it would take to sell current inventories at the current rate of sales activity, is also rising. It was 5.7 months across the country at the end of June, up from 4.2 months a year ago.

“The housing market is becoming more challenging for sellers,” said Georges Pahud, CREA president. “Buyers are in less of a hurry.”

Economist Adrienne Warren of the Bank of Nova Scotia said the market has peaked.

“Canada’s housing market has clearly shifted gears, with monthly sales [seasonally adjusted] now running about 25% below last December’s peak,” she said. “The sense of urgency see n last fall and winter in the lead-up to tighter mortgage-lending criteria and the introduction of the HST in Ontario and British Columbia has faded.”

Financial Post