Tuesday, March 18, 2008

Canadian Housing Market Update

Canadian Housing Market Update?

The Canadian housing market continues to lose momentum after a prolonged show of strength. Today's February existing home sales data from the Canadian Real Estate Association show that resale activity fell 6.4% from the prior month and 9.6% from a year ago. While this year's wicked winter weather has no doubt played a role, the 8.9% y/y drop in sales in the first two months of 2008 is a big turnaround from last year's 7.6% rise in overall sales.

As Canadian sales have lost steam, we are finally seeing some signs of cooler price gains as well: Average home prices were up 5.3% from year-ago levels in February, less than half of last year's average increase of 11%, and one of the smallest gains since the boom got rolling in 2002. The yearly price rise is still skewed by the mammoth 55% and 41% jumps in Regina and Saskatoon (respectively), although 7 cities reported double-digit gains last month.

The previously steaming hot Alberta markets are fully back down to room temperature, and continue to drag heavily on the overall sales figures. Sales in Calgary (-35.4% y/y) and Edmonton (-31.8% y/y) fell steeply from a year ago, while new listings continue to rise sharply. That's a nasty omen for the local markets, and both have seen price increases dip to around the 5% range.

The Bottom Line: With the further slide in February, Canadian home sales are now firmly below year-ago levels, another sign that the Great White North's housing boom is grinding to a finish. Dismal weather (unless you're a polar bear) may have exaggerated the weakness in the opening months of the year, but there are more durable factors to suggest that the bloom is off the boom. Sagging affordability and the likelihood of increased consumer caution point to calmer housing market conditions through the rest of 2008.

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A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate

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RE/MAX Realty Specialists Inc.

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