Canada home sales rise 2.5 percent in September from August

Mon Oct 15, 2012 10:08am EDT
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By Andrea Hopkins

TORONTO (Reuters) - Sales of existing homes in Canada rose in September from August, notching the first monthly gain since March, the Canadian Real Estate Association said on Monday, but year-over-year sales dropped sharply in another sign Canada's hot housing market is cooling.

The industry group for Canadian real estate agents said sales activity was up 2.5 percent in September from August. Actual sales for September, not seasonally adjusted, were down 15.1 percent from a year earlier.

CREA's Home Price Index rose 3.9 percent in September, its smallest gain since May 2011.

The group said new mortgage rules, introduced by the federal government in July to restrain borrowing, have kept a lid on sales activity, a trend that is expected to carry through the final months of 2012.

"National activity is likely to remain down from year-ago levels over the fourth quarter of 2012," Gregory Klump, CREA's chief economist, said in a statement.

"While some first time home buyers may no longer qualify for mortgage financing under the new rules, it is likely that many others are stepping back and reassessing how much house they can realistically afford, which is one of the things new mortgage rules were designed to do," he added.

Mindful of the U.S. housing market crash that triggered the global financial crisis, Finance Minister Jim Flaherty in June tightened rules on government-backed mortgages for the fourth time in four years. The changes took effect July 9.

The September gain marked a partial recovery from the 6.2 percent monthly drop recorded in August.   Continued...

A sold sign is displayed in front of a home in Toronto December 15, 2009. REUTERS/Mike Cassese