TORONTO (Reuters) - Sales of existing homes in Canada dipped in November from October as a surge in autumn sales spurred by rising mortgage rates abated, the Canadian Real Estate Association said on Monday.
The industry group for Canadian real estate agents said sales activity was down 0.1 percent last month from October.
While actual sales for November, not seasonally adjusted, rose 5.9 percent from a year earlier, CREA said activity was sharply lower than just two months earlier, when the prospect of rising mortgage rates spurred home buying.
“National sales activity in November stood 3.4 percent below the peak reached in September, providing further evidence that activity in the later summer and early fall was likely boosted by home buyers with pre-approved mortgages at lower than current interest rates jumping into the market before their pre-approvals expired,” CREA said.
The prospect of rising mortgage rates typically steals demand from the future, a drop now in evidence.
But economists said they expect some bounce back in activity because bond yields, which set longer-term mortgage rates, have eased, before the overall market manages a soft landing.
“We expect activity to grind higher in the months to come following the recent decline in bond yields that will help to restore a modest amount of affordability relative to the summer,” David Tulk, chief Canada macro strategist at TD Securities, said in a research note.
“But taken in conjunction with the accumulated impact of tighter mortgage regulations, higher yields expected over the course of 2014 will limit the upside for the housing market. Instead, we expect that the market is destined for a soft landing and will have less of a role to play in supporting economic growth in a recovery that will become more reliant on exports.”
Canada’s housing market avoided the crash experienced in the United States, due in part to more conservative lending standards and a stronger economy. But economists have long predicted a correction eventually in Canada, but were divided over whether prices will drop sharply or simply stagnate in a so-called “soft landing” scenario.
CREA said there were 6.0 months of inventory at the national level at the end of November, unchanged from one month earlier. The national sales-to-new listings ratio slipped to 53.4 percent in November from 54.5 percent in October, well within what CREA considers balanced territory.
The actual national average price for homes sold in November 2013 was C$391,085 ($368,500), an increase of 9.8 percent from the same month last year.
CREA’s home price index rose 4.1 percent from November last year. The index is considered a better gauge of price trends because it is not affected by changes in the mix of sales activity, softening the impact of changes in big expensive markets.
($1 = 1.0612 Canadian dollars)
Reporting by Andrea Hopkins; Editing by Chizu Nomiyama and Jeffrey Benkoe