3 Min Read
(Adds forecast, regional details)
By Andrea Hopkins
TORONTO, June 15 (Reuters) - Sales of existing Canadian homes fell 2.8 percent in May from a record high in April as inventories fell to all-time lows in key regions, a report from the Canadian Real Estate Association (CREA) showed on Wednesday.
The industry group said its Canadian home price index jumped 12.5 percent in May from a year earlier, while actual sales, not seasonally adjusted, rose 9.6 percent from May 2015.
"Many of the housing markets in British Columbia and Ontario that led the monthly decline in national sales are also places where months of inventory have fallen to all-time lows," said Gregory Klump, CREA's chief economist.
"This suggests a lack of supply may be starting to rein in sales amid a continuation of strong housing demand."
The national sales to new listings ratio edged up to 64.8 percent in May 2016, the tightest reading since October 2009 and firmly into seller's market territory.
There were 4.7 months of inventory on a national basis at the end of May 2016, unchanged from April and matching the lowest level in more than six years.
The report included a quarterly forecast predicting national sales activity and prices would level off as 2016 ends and plateau in 2017, completing the long housing boom that some observers fear will crash.
The Bank of Canada warned last week that the rapid pace of price increases in Toronto and Vancouver is unlikely to continue, while the potential for a downturn is growing.
Some data have shown a sales slowdown has already begun in the two hottest cities.
Sales activity should begin to shift from Ontario and British Columbia as supply shortages drive up prices and constrain deals, dampening national sales in the second half of 2016, CREA said.
Sales in the three provinces most dependent on the energy industry - Alberta, Saskatchewan and Newfoundland and Labrador - are expected to struggle to regain traction this year, resulting in "continuing softness for home prices," CREA said.
Nationally, sales are forecast to rise 6.1 percent to 536,400 in 2016, while the average price was expected to increase 10.8 percent to C$490,700 ($381,037.43) in 2016, the forecast showed.
Sales activity is expected to inch up 0.2 percent to 537,500 units in 2017, while the average price is seen rising 0.1 percent to C$491,100 next year. ($1 = 1.2878 Canadian dollars) (Editing by Chizu Nomiyama and Jeffrey Benkoe)