TORONTO (Reuters) - Existing home sales were little changed in March from February and prices crawled higher, suggesting the housing boom that helped end the recession has stalled, though not reversed.
Industry data on Friday showed 38,710 homes changed hands in March, up just 0.1 percent from February on a seasonally adjusted basis. The average sale price rose 0.7 percent from February to just over C$371,000 ($386,500).
Sales activity was down 6.6 percent from a year earlier, when the market was coming off a post-recession boom driven partly by a sharp drop in mortgage rates.
Canada’s housing market took a brief hit from the financial crisis, but avoided the meltdown seen in the United States and many other Western countries.
Canadian banks also escaped the crisis largely unscathed and were able to continue lending. The resulting double-digit housing price gains seen in late 2009 and early 2010 worried some policymakers and prompted the federal government to tighten mortgage rules.
The Canadian Real Estate Association (CREA) report on Friday showed house prices were up 8.9 percent in March from a year earlier.
But the industry group said average price gains have been skewed by a record number of multimillion-dollar sales in the Vancouver area, Canada’s most expensive property market.
“If Vancouver is excluded from the equation, the national average price increase is cut by more than half,” CREA Chief Economist Gregory Klump said in a statement.
CREA said the new mortgage regulations, brought in to try to cool the market and prevent a property bubble, may have caused some sales in more expensive housing markets to be pulled forward.
Other potential hurdles for the housing market in coming months include a recent rise in mortgage rates, triggered by higher bond yields, and the likelihood the Bank of Canada will resume its rate hike campaign this year.
But BMO Capital Markets economist Doug Porter said that, excluding Vancouver, “the city with tiger blood”, prospects for the market seemed balanced.
“While there is plenty of chatter about the possibility of a severe correction in Canadian housing, the risk looks highly concentrated in geographic terms,” he said in a note to clients.
“Canada’s housing market looks to be headed for a soft landing, at least in the vast majority of cities.”
Separately, Statistics Canada said on Friday that investment in nonresidential building construction in the first quarter of 2011 increased by 1.3 percent from the previous quarter, the fifth consecutive advance.
Other data showed foreign direct investment in Canada rose by 2.6 percent to C$561.6 billion in 2010 from 2009, largely due to greater interest from the United States.
Editing by Rob Wilson