Sales of existing homes rebounded in September but even the group representing the country’s almost 100,000 real estate agents is finding it hard to muster much enthusiasm for a market many say is slowing fast.
But the Ottawa-based Canadian Real Estate Association, which represents about 100 boards across the country, is not predicting the free fall others have been expecting, though it suggested sales in the fourth quarter of 2012 will be off from a year ago — in part because of new mortgage rules which tightened up lending requirements.
CREA stands by its assertion there will not be much of a correction so consumers sitting on the sidelines waiting for a deal are unlikely to find one this year or next.
“Even in Vancouver, you have had some large declines in sales activity and no large declines in prices. In fact, no decline, prices continued to rise,” said Gregory Klump, the chief economist at CREA. “What you really have to do is look at market balance, what happens to supply and demand and the balance between the two.”
His comments came as the group reported sales on a national basis were up 2.5% in September from August on a seasonally adjusted basis. Actual sales were down 15.1% in September compared to a year ago. New listings climbed 6.5% from August to September.
Mr. Klump said any concerns about an oversupply should be tempered because the market will rebalance when people realize that homes are not selling.
“Once sales decline, [new listings] will too but with a lag,” he said. “We are looking at the continuation of a balanced market. Sellers will realistically evaluate ‘what it is I can live with in terms of my asking price” and if offers come in below they will let the listing expire.”
So far, CREA’s forecast for relatively little change in price appears to be accurate.
The average price of a home sold in Canada in September was $355,177, a 1.1% increase from a year ago. Year to date prices are up 1% from a year ago.
Prices are expected to increase 0.6% this year nationally but the figure would be much higher without the 6% decline in prices forecast for British Columbia. In 2013, CREA says prices are expected to decline 0.1% nationally.
The bounce back in sales in September did not do much to temper the view of most economists.
“The Canadian housing market has clearly lost some of its lustre. Sales have fallen from their peaks in most markets across the country with today’s gain only partially offsetting August’s substantial decline,” said Francis Fong, an economist with Toronto-Dominion Bank.
“That being said, with interest rates remaining sufficiently accommodative, we do not anticipate any precipitous decline in housing activity in the near term. Rather, we expect a gradual unwinding of the imbalance in both sales and prices over the next few years.”
Doug Porter, deputy chief economist with Bank of Montreal, said the housing sector is clearly turning into a buyer’s market but he does not see a precipitous decline in prices coming.
“While the 15% drop in year over year sales suggests Canadian housing is making like Felix Baumgartner (falling past the speed of sound) the details are not nearly as weak, and still suggest that the housing market is gliding to a lower altitude,” said Mr. Porter.
Others are not so confident there will not be a major decline, in spite of the strong September numbers.
“The trend has been pretty clear about what has been happening in vulnerable markets like Vancouver and Toronto,” said Dave Madani, an economist with Capital Economic. “I’m even more pessimistic about housing now that we’ve seen the household balance sheet data.”
He’s been calling for a 25% decline in prices and says the new data showing debt-to-income ratio rose to 163.4% in the second quarter does not bode well. “I’m even nervous now about the housing market,” said Mr. Madani.