housing

Canadian real estate market stalls as sales fall, but prices remain steady

January 22, 2013
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canadian real estate

Canadian real estate market offering mixed signals

According to the Canadian Real Estate Association, home sales changed very little in December after edging down for several months. Inventory of newly listed homes is also down, with the nation’s saving grace being that home sales are not showing signs of slumping. The Aggregate Composite MLS® HPI rose 3.3 per cent on a year-over-year basis in December, representing the eight consecutive annual loss, and the slowest rate of increase since April 2011.

“The decline in new supply may reflect purchase offers below asking price that are made to sellers who are under no pressure to sell. Instead they choose to take their homes off the market once their listing expires,” Gregory Klump, CREA Chief Economist said in a statement. “In the absence of economic stresses like a spike in interest rates or a sharp drop in employment, this dynamic can be expected to keep the housing market in balance.”

This marks the fifth straight year that annual home sales activity has held to within short reach of 450,000 units. “Successive rounds of tightening mortgage regulations have kept the housing market in check during what has become an extended low interest rate environment,” said Klump.

Key policy rates remain low, unchanged

Last month, The Bank of Canada announced that it would be keeping its key policy rate at 1.0 percent, where it has been for two years, with the CREA noting that this marks the longest period since the 1950s that rates have been left unchanged.

The trade group said last fall, “The Bank of Canada made clear its fondest wish is still for an opportunity to hike rates at some point, but has been forced to soften its stance given the weakened prevailing economic outlook.” Economists expect rates will remain unchanged for some time in response to the changing Canadian economy.

“Canadian housing market remains firmly in balanced territory,” the CREA reports, and while the data is unveiling pain points in the economy, particularly housing, many areas are still thriving with healthy sales, which could keep the sector afloat as it endures this storm.

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3 Comments

  1. It’s not a true mystery of mixed signals. Sales decline first and are typically followed by a price drop. That’s the nature of supply and demand. But even when the decline in price occurs, we still won’t be seeing a rapid crash. Affected markets are going to experience the full effects of the down-side of the real estate cycle while markets that have not been overinflated are going to continue to thrive and prove viable real estate investments. The Calgary real estate market is a good example.

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