House prices in Canada took the biggest tumble in almost two years this fall, according to a new reading of the market.
Prices were recorded having fallen 0.35% in September, the biggest jump since Novmeber 2010 when the index dropped 0.39%.
Prices were down from August in six out of 11 major cities, including Vancouver, Victoria and Montreal. That said, comparing the nation’s statistics to those of last year, home prices are 3.6 percent higher.
According to National Bank Senior Economist Marc Pinsonneault, Flaherty’s mortgage rules have "undoubtedly contributed to cooling in the market. It doesn’t mean a catastrophe, but it’s consistent with a soft landing in the sector."
He added that prices are likely to continue to drop through to the end of 2013. "In our view, if sales continue to decline, a cumulative price drop of around five per cent is likely in a soft-landing scenario for the Canadian home resale market."
The Bank of Canada will continue to monitor the market, and this week even hinted at a rate hike for the first time in two years.
Governor Mark Carney argued that "some modest withdrawal of monetary policy stimulus will likely be required” in the mid-term.
Doug Porter, deputy chief economist with BMO Capital Markets, agrees that's likely.
"I would take it more as a caution that if the slowdown in the housing sector doesn't stick, the Bank of Canada is ready to do something about it,” he said.