Home resales fall on tighter mortgage rules

Wed May 18, 2011 1:25pm EDT
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By Ka Yan Ng

TORONTO (Reuters) - Sales of existing homes in Canada fell 4.4 percent in April from March as activity dropped off after a first-quarter rush to buy before the introduction of new mortgage rules.

The Canadian Real Estate Association (CREA) said on Tuesday that 36,564 homes changed hands in April, down from 38,263 in March.

The national average price in April rose 8 percent from a year earlier to a nonseasonally adjusted C$372,544 ($380,147), while new listings edged up 1.3 percent in April from March, CREA said.

The decline in sales came as little surprise as tighter mortgage rules, which took aim at mortgage amortization and refinancing, came into effect early in the spring. CREA said the new regulations probably sidelined a number of first-time homebuyers.

"April's decline in existing home sales shows the impact of the March 18 changes to mortgage rules that lifted existing home sales in Q1 to their highest level in a year as buyers rushed to buy ahead of the change," said Leslie Preston, economic analyst at Toronto-Dominion Bank.

"We don't expect the first quarter's pace to be sustained and April's reading sets the stage for an expected softening."

Canada's housing market has shown resiliency compared with other countries whose markets dived during the financial crisis.

Data on Tuesday showed the U.S. housing market has still not recovered as housing starts and building permits fell in April. Residential construction was crowded out by an oversupply of used homes on the market, in particular, foreclosed properties.   Continued...