TORONTO (Reuters) - Canadian home resales dropped in February but a show of strength in the Vancouver market cushioned the fall, data from the Canadian Real Estate Association (CREA) showed on Tuesday.
Overall, 38,699 homes changed hands in February, down 1.6 percent from January, while the national average price jumped 8.8 percent year-over-year to C$365,192 ($368,881).
But because of the strength in the heavily weighted Vancouver area -- where the average home price, at C$790,380, was more than double the national average -- national sales did not fall as much as they could have.
"Note the extent to which Vancouver dominates these figures...the city absolutely stands alone," said Doug Porter, deputy chief economist at BMO Capital Markets.
"Suffice it to say that any real concerns about a Canadian housing bubble are highly concentrated in geographic terms," he added, calling the February home sales data a "one-city wonder".
Sales fell from January in almost two-thirds of the markets surveyed, compared with a 7 percent jump in Vancouver, the CREA data showed. The industry group also cautioned that the average price was distorted by a record number of multimillion-dollar home sales around the Greater Vancouver area.
"When you take Vancouver out of the equation, the year-over-year increase in the national average price drops to 3.4 percent," said Gregory Klump, CREA's chief economist.
"While that's still stronger than in the past six months or so, national average price gains may recede after tighter mortgage regulations take effect in March."
Analysts expect that new rules on mortgage amortization periods and refinancing that take effect later this week will cool the market.
"Now that these new rules are around the corner, we expect to see a very modest pace of growth for the housing sector as a whole heading forward, especially as households will need to adjust to the inevitable rise in mortgage rates," said Mazen Issa, macro strategist at TD Securities.
Expectations of a rise in Canadian interest rates later this year could push some people to buy before rates go up, although some could also be discouraged from entering the market altogether. However, Royal Bank of Canada decreased some mortgage rates on Tuesday because of lower bond yields resulting from the crisis in Japan. It trimmed its five-year fixed mortgage rate by 0.10 percent to 5.34 percent.
Sales in February were down 5.9 percent from a year earlier, the smallest year-over-year decline in nine months.
The number of new listings edged up 1.5 percent from the previous month on a seasonally adjusted basis, building on a 4.3 percent monthly increase in January.
With flat February readings in both sales activity and new supply, the housing market was in balanced territory. The national sales-to-new listings ratio, a measure of market balance, stood at 53.5 per cent in February, little changed from the previous four months.
Reporting by Ka Yan Ng; Editing by Peter Galloway