TORONTO (Reuters) - Sales of existing homes in Canada rose in September from August, notching the first monthly gain since March, the Canadian Real Estate Association said on Monday, but year-over-year sales dropped sharply in another sign Canada's hot housing market is cooling.
The industry group for Canadian real estate agents said sales activity was up 2.5 percent in September from August. Actual sales for September, not seasonally adjusted, were down 15.1 percent from a year earlier.
CREA's Home Price Index rose 3.9 percent in September, its smallest gain since May 2011.
The group said new mortgage rules, introduced by the federal government in July to restrain borrowing, have kept a lid on sales activity, a trend that is expected to carry through the final months of 2012.
"National activity is likely to remain down from year-ago levels over the fourth quarter of 2012," Gregory Klump, CREA's chief economist, said in a statement.
"While some first time home buyers may no longer qualify for mortgage financing under the new rules, it is likely that many others are stepping back and reassessing how much house they can realistically afford, which is one of the things new mortgage rules were designed to do," he added.
Mindful of the U.S. housing market crash that triggered the global financial crisis, Finance Minister Jim Flaherty in June tightened rules on government-backed mortgages for the fourth time in four years. The changes took effect July 9.
The September gain marked a partial recovery from the 6.2 percent monthly drop recorded in August.
CREA said activity picked up in about 60 percent of local markets in September, including Vancouver, Calgary, Edmonton, Toronto and Quebec City.
National sales reached 110,376 units in the third quarter of 2012, down 6.5 percent from the previous quarter. A total of 366,353 homes have traded hands over Canadian MLS Systems so far this year, up one percent from levels reported over the first nine months of 2011.
The national sales-to-new listings ratio, a measure of market balance, stood at 49 percent in September, remaining near the midpoint of a balanced market, CREA said.
The national average price for homes sold in September, not seasonally adjusted, was C$355,777 ($363,500), up 1.1 percent from the same month last year. The 3.9 percent increase in the composite House Price Index was the fifth time in as many months that the year-over-year gain shrank.
($1 = 0.9787 Canadian dollars)
Reporting By Andrea Hopkins; Editing by Chizu Nomiyama and W Simon