Despite a slight recovery from August, home sales in September fell 15.1 per cent from a year ago due to tighter mortgage lending rules and an uncertain economy, the Canadian Real Estate Association said Monday.
The association said sales in September were up 2.5 per cent from August -- the first month-to-month gain since March.
Compared with September 2011, however, the number of deals across the country last month was down sharply, due in large part to a slowdown in Vancouver.
"National activity is likely to remain down from year-ago levels over the fourth quarter of 2012," said Gregory Klump, CREA's chief economist.
"While some first time home buyers may no longer qualify for mortgage financing under the new rules, it is likely that many others are stepping back and reassessing how much house they can realistically afford, which is one of the things new mortgage rules were designed to do."
TD Bank economist Francis Fong said the month-over-month gain only partially offset August's drop with sales off their peaks in most markets across the country.
"The Canadian housing market has clearly lost some of its lustre," Fong wrote in a note to clients.
"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."
The sales report came as the Conference Board of Canada said that most Canadian cities are facing lower housing starts in the coming years as markets slow, with only 10 of the 28 cities showing positive long-term expectations.
CREA said Monday there was still a balance between the number of homes for sale and the number of buyers in September but conditions have eased.
The national sales-to-new listings ratio, a measure of market balance, stood at 49 per cent in September 2012, remaining near the midpoint of a balanced market.
Even though sales were down from a year ago, the national average home price was up 1.1 per cent in September from a year earlier.
But the MLS HPI home price index, which also takes into account other factors, showed its smallest gain since May 2011, rising by 3.9 per cent in September.
The association said Vancouver, the country's most expensive residential real-estate market, skewed the national results.
Excluding that city, the national average price was up 3.4 per cent from a year ago.
The MLS HPI in Vancouver posted a 0.8 per cent decline year-over-year in September. In contrast, Calgary had a 6.5 per cent increase in the index, the Toronto area was up 5.7 per cent, the Montreal area was up 2.2 per cent and the Fraser Valley in southern British Columbia was up 2.1 per cent.
Regina had the biggest increase among markets measured by the HPI, with a gain of 14.2 per cent from September 2011.