The Canadian Real Estate Association said January sales dropped by 4.5 per cent from December on a seasonally adjusted basis, the first monthly decline since August 2011 and the largest monthly decline since July 2010.
Price increases are also beginning to shrink with the average Canadian home selling for $348,178 in January, a 1.2 per cent increase from a year ago.
“The national housing market is stabilizing and remains well balanced,” said Gary Morse, president of CREA. “That said, forecasts for economic and job growth going forward vary widely for different parts of the country, suggesting a possible continuation of a softening trend in some markets, as well as the potential that demand will pick up based on strong fundamentals in others.”
Gregory Klump, chief economist with CREA, warned that year-over-year price comparisons could become negative as they are affected by what happened in the Vancouver market in the first half of 2011. “At the time, high-end home sales in Vancouver’s priciest neighbourhoods surged to all-time record levels, which skewed the national average price upward considerably,” he said.
Phil Soper, chief executive of Royal LePage Real Estate Services, noted January 2012 sales were still up four per cent from a year ago and in-line with his expectations for the market. “I think if we step back and look at the numbers, they were impacted by the lack of inventory in the Toronto market, our largest,” said Soper, adding he does expect both prices and sales to cool in 2012. “The pricing we are seeing is in line with a 2.8 per cent increase we are expecting for 2012.”
He says while a crash is unlikely, consumers are going to have get used to a moderate housing market where prices are not in the double-digit year-over year range. “There aren’t any more people to pull into transactions. The stimulative impact of interest rates can pull some people into the market but not some kid out of college who doesn’t have a job yet,” said Soper.
Others in the industry maintain the giant collapse that has been forecast for the last four or five years is not coming and certainly not to the degree housing values dropped in the United States.
Gerry Solway, chief executive of Home Capital Group, thinks Canadians have been convinced of a crash because of the information that flows north from the U.S.
“I think there has been a great deal of attention by people who look at the housing market from the U.S. perspective, it went down so it’s gotta go down in Canada. It doesn’t,” said Solway whose company reported adjusted basic earnings up 30.6 per cent in 2011 from a year earlier. “I very much agree with what (Canada Mortgage and Housing Corporation) said, that levels will stay close to last year.”
CMHC said the combination of low mortgage rates and a moderate expansion in the Canadian economy should keep new home construction and existing home sales at about the same level in 2012 as 2011. The Crown corporation even sees a 2.7 per cent price increase for this year.
Adrienne Warren, an economist with Bank of Nova Scotia, agrees with the assessment the market will be flat in 2012. “Despite the lure of historically low interest rates, the softening trend in employment growth over the past six month combined with tightening in mortgage rules last spring have lowered the temperature on Canada’s previously red-hot housing market,” she said, adding markets to the west should outperform those in central and Eastern Canada.