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TORONTO (Reuters) - Sales of existing homes in Canada cooled in January from December's level, but they surged on a year-over-year basis, suggesting the housing sector is still a major factor in the country's economic recovery.
A total of 43,910 homes changed hands in January, down 2.8 percent from December, the Canadian Real Estate Association said on Wednesday. But sales were up 58 percent from January 2009, when the market hit bottom in the wake of the global financial crisis.
Economists warned that year-over-year comparisons are likely to shrink in coming months because the recovery of the housing market started in February 2009.
Encouraged by low interest rates and rising consumer confidence, the average national resale house price rose 5 percent to C$320,333 in 2009. Year-over-year price comparisons were often in double digits, skewed higher because of rebounding activity in some of the more expensive markets.
The real estate association said the national average price in January rose 19.6 percent from a year earlier to C$328,537 ($305,901).
The dip in sales from December is unlikely to quiet debate about whether there is a housing bubble in Canada. Analysts said there may be a fresh buying frenzy ahead of interest rate hikes expected later this year and the implementation of tougher mortgage rules outlined by the government on Tuesday.
"On the whole, the report suggests that while the Canadian housing market remains quite buoyant, sales activity moderated somewhat in January," said Millan Mulraine, economics strategist at TD Securities.
"This respite, however, is unlikely to last long, as we expect sales activity to pick up significantly in the next few months as home buyers that will be affected by yesterday's announced regulatory changes rush to get ahead of the April 19 deadline for the new measures to be put in pace."
The federal government said on Tuesday its tweaking of mortgage rules will help calm the country's hot housing sector, citing the need to prevent a property price bubble.
New listings rose in January for a fourth straight month, up 0.3 percent from December.
Sales eased in most provinces, with the exception of Quebec and some Atlantic provinces. CREA said Ontario accounted for about half the national decline.
Reporting by Ka Yan Ng; editing by Peter Galloway