Canada December home sales dip, prices hold steady

Tue Jan 15, 2013 10:23am EST
 

By Andrea Hopkins

TORONTO (Reuters) - Sales of existing homes in Canada fell in December from November and year-over year sales tumbled, the Canadian Real Estate Association said on Tuesday, further evidence Canada's once-hot housing market has slumped.

CREA, the industry group for Canadian real estate agents, said in a report that sales activity was down 0.5 percent in December from November, the third consecutive monthly decline.

Actual sales for December, not seasonally adjusted, were off 17.4 percent from a year earlier, the largest drop since tighter mortgage lending rules went into effect last July.

The federal government tightened the rules after roaring sales since 2009 and historic levels of household debt sparked fears of a bubble. Sales have since slumped and economists are divided over whether there will be a U.S.-style housing crash or a soft landing of slower sales and gradually declining prices.

"With the whopping 17.4 percent year-over-year change in sales seen in December, we suspect that the impacts from the mortgage rule tightening in July are now fully priced in," Sonya Gulati, senior economist at TD Economics, wrote in a research note.

"We expect the Canadian housing market to stabilize at current levels over the next few months. When looking at previous mortgage rule tightening episodes, the housing market impacts have been temporary in nature. There is no reason to think that this time will be any different."

CREA's Home Price Index rose 3.3 percent in December from a year earlier, the smallest gain since April 2011. This marks the eighth time in as many months that the year-over-year gain shrank.

CREA said sales were handicapped by December's five full weekends, since far fewer deals happen on Saturday and Sunday.   Continued...

 
A builder works on the the roof of a new home under construction in the Montreal suburb of Brossard August 10, 2010. REUTERS/Shaun Best