08/15/2012 11:49 EDT | Updated 08/16/2012 07:55 EDT

Canada House Prices: Toronto, Vancouver Drag Down National Average, CREA Reports


TORONTO -- Home sales across the country declined marginally last month, continuing a recent trend toward a gradual cooling in what had been a red hot market, according a study issued Wednesday by the Canadian Real Estate Association.

Overall, CREA said resale housing numbers were down just 0.01 per cent in July compared with June, although non-seasonally adjusted sales were up 3.3 per cent last month compared with July 2011.

And, although prices were above year-ago levels in most markets, they were off recent peaks in what had been the booming Greater Vancouver and Greater Toronto areas.

CREA said the number of newly listed homes on its Multiple Listing Service fell 3.3 per cent from June to July, while the national average home price was two per cent lower than in July 2011.

"Stable sales combined with fewer new listings firmed the national housing market, keeping it in balanced market territory,'' CREA said in its monthly report.

It added that the number of local housing markets was roughly evenly split between those that saw month-over-month gains and those that posted monthly declines.

The latest CREA figures appeared to confirm observations and predictions by Canada Mortgage and Housing Corp., which on Tuesday forecasted a moderate slowdown in both new-home construction as well as sales of existing homes.

CMHC has been saying for some time that it expects housing prices in most markets will grow more slowly than they have been recently.

It says housing starts and home sales have been strong in 2012 _ particularly when it comes to multiple-dwelling units such as condos and apartments _ but will soften moderately in coming months into 2013.

Based on data compiled by the Canadian Real Estate Association, CMHC said Tuesday that it expects about 466,600 units of existing housing to be sold this year and 469,600 units in 2013.

"Balanced market conditions in most local housing markets will result in a slowing in house price growth as well,'' said Mathieu Laberge, CMCH's deputy chief economist.

CMHC provides various levels of mortgage insurance to protect lenders from defaults by home buyers.

Various factors, including affordability and exhaustion of pent-up demand have been cited for the gradual decline. A number of regulatory changes that have gradually tightened lending rules are also believed to be having an effect.

"Recent changes to mortgage regulations were widely expected to temper sales and prices in Greater Toronto and Greater Vancouver, and the data released today confirms that,'' CREA president Wayne Moen said.

Gregory Klump, CREA's chief economist, said recent regulatory changes mean some first-time home buyers may have difficulty qualifying for mortgage financing due to shortened amortization periods.

"As the lynchpin of the housing market, lower first-time buying activity will have knock-on effects over the rest of the market,'' he said, adding that it will likely take more time for buyers looking to upgrade to sell their current home.

Meanwhile, the association said that nationally, resale inventories, or the time it would take to sell current inventories at the current sales rate was 6.1 months at the end of July, unchanged from the June reading.

The inventory measure has been hovering around six months since the end of 2010.

Average sale prices in July were up from levels of a year ago in about seven of every 10 local markets, but falling sales in Greater Vancouver continued to impact the national average price.

The national average price for homes sold in July 2012 was $353,147, down two per cent from the same month last year. Excluding Greater Vancouver from the calculation, the national average price was up 1.1 per cent year over year.

Meanwhile, the MLS Home Price Index, which tracks prices in five of Canada's most active housing markets _ Greater Vancouver, the Fraser Valley, Calgary, Greater Toronto, and Montreal _ was up 4.5 per cent year-over year in July.

"This was the third time in as many months that the year-over-year gain shrank, and marks the slowest rate of increase in over a year,'' with gains moderated in all housing categories, CREA said.

One and two-storey single family homes posted the strongest year-over-year growth in July, with two-storey single family home prices up 5.8 per cent and one-storey single family prices up 5.6 per cent.

Prices for townhouse and apartment units continue to see more modest gains, rising 2.5 per cent and 2.2 per cent respectively.

The HPI posted the largest year-over-year increase in Greater Toronto at 7.1 per cent, followed by Calgary at six per cent. Lower increase were posted in the Fraser Valley (2.5 per cent), Montreal (2.1 per cent), and Greater Vancouver (0.6 per cent).

However, on a month-over-month basis, prices were down everywhere but Calgary and the Fraser Valley, up 0.3 and 0.14 per cent respectively.

Elsewhere, prices were down month over month by 0.46 per cent in Montreal, 0.33 per cent in Greater Toronto and 0.74 per cent in Greater Vancouver.

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