The Canadian real estate market continued its slowdown in February, with the number of homes sold declining 1.6 per cent compared to the previous month and dropping 5.9 per cent from a year ago. The sales drop was the smallest year-over-year decline in nine months, the Canadian Real Estate Association said, but it underscores the market returning to a more balanced level from the highs it experienced through the early part of 2010.
"Most local housing markets in Canada are well balanced, but there are still a number of buyers’ and sellers’ markets," CREA president George Pahud said Tuesday.
Price gains, however, are anything but balanced. The national average rose 8.8 per cent year-over-year to $365,192 in February. The average price has been skewed higher nationally and in British Columbia recently by a record number of multimillion-dollar sales in a couple of areas in and around Vancouver, said CREA's senior economist, Gregory Klump.
"When you take Vancouver out of the equation, the year-over-year increase in the national average price drops to 3.4 per cent," Klump said.
Listings rose 1.5 per cent from the previous month, building on the 4.3 per cent gain in January. The rise is consistent with CREA’s expectation that many sellers, who shied away from listing their home last summer when the national housing market softened, would put their homes for sale early in 2011, now that they're confident better prices have returned.
Inventory, a key real estate metric that measures the number of months it would take to sell the entire housing stock at the current sales pace, stood at 5.7 months at the end of February on a national basis. This is little changed from the 5.5 months reported in January, when it reached the lowest level since last April.
New mortgage rules announced by the Finance Department in January and set to begin Friday will make the maximum payback period 30 years — resulting in somewhat higher regular payments than with the 35-year amortization that has been the choice of about 30 per cent of home buyers.
The rule changes will increase the monthly payment on a $300,000 mortgage at four per cent interest by $105, but will also reduce total interest paid by $42,288 over the life of a mortgage because it's repaid five years sooner.
CREA expects the rules will begin to put a lid on prices starting next month, as less buyers will be able to come up with the shorter terms and higher monthly payments they bring.
"National average price gains may recede after tighter mortgage regulations take effect in March," Klump said