Analysis: Canada braces as housing slowdown takes hold

Mon Nov 5, 2012 4:54am EST
 

By Andrea Hopkins

TORONTO (Reuters) - Long convinced the country's housing boom would never end in a crash, Canadians have watched this autumn as a sharp slowdown in real estate spreads across the country, leaving would-be home buyers hopeful and sellers scared.

"The power is in the hands of the buyer - that's what I'm feeling," said Andria Petrillo, 32, as she and her husband toured a quiet open house in the heart of Toronto, where crowds and chaos once reigned over weekend home showings.

But like most people shopping for a new home, Petrillo has to sell her old one first. And that's where she worries.

"With the economy, I'd like to sell now. I worry about selling because it's a condo, and that market is cooling even faster than houses," said the newly married sportscaster. "We can't sell it for a ridiculous amount of money any more."

Signs are everywhere that Canada's long run-up in house prices is over, hit by a combination of tighter mortgage lending rules and growing consumer reluctance to take on more debt. Sales of existing homes are down steeply, with condo sales hit especially hard, and some long-booming prices have started to fall.

Sales always slump as the real estate market heads into winter. The big question will be whether spring brings renewal, or confirmation that the party is over.

DEBT RISES, GDP FALLS

Canadian households hold more debt than American families did before the U.S. housing bubble burst, which has led the government to tighten mortgage lending rules four times in four years.   Continued...

 
Canadian flags are seen on houses in the Vancouver suburb of Richmond prior to the Vancouver 2010 Winter Olympic Games February 9, 2010. REUTERS/Chris Helgren