Home sales down 3 per cent from year ago while price index rises slowly

60748_532177166812222_1788106499_nCanadian home prices continued to rise in April even as year-over-year sales  fell three per cent, according to the latest industry data that has left  economists divided over whether the market can count on a soft landing.

“I think some people are perhaps confused by the fact that we’ve seen a drop  in sales but prices haven’t fallen yet,” said David Madani, an economist at  Capital Economics.

“But that’s normal because prices respond to sales activity with a lag,” said  Madani, who believes it’s still too early to rule out a sharp correction in what  until recently has been an overheated market.

“My expectation is that sales will continue to weaken, as they have been  doing since the beginning of last year.”

The real test will be the summer months when the housing market typically  heats up, Madani added.

With employment contracting in the first quarter of the year and the tougher  mortgage rules put in place last July by federal Finance Minister Jim Flaherty,  Madani said he sees little reason why sales would “magically” rebound, as some  bank economists are predicting.

“Prospective buyers are just stepping back, because they’re afraid of what  perhaps lurks for housing over the next couple of years,” he said.

But Douglas Porter, chief economist at BMO Capital Markets, said the fact  remains that prices are still rising faster than inflation, albeit at the  slowest rate in more than two years.

“Despite the very loud gnashing of teeth and excessive wringing of hands for  well over a year on the topic, Canadian home prices remain incredibly calm, cool  and collected,” Porter said in a note.

“The surprises on the sales data in recent months have consistently been on  the high side of expectations, not the low side.”

The Canadian Real Estate Association said Wednesday there were 47,997 homes  sold in April, down from 49,553 a year earlier.

On a seasonally adjusted basis, April sales were up 0.6 per cent from  March.

Gregory Klump, the real estate association’s chief economist, said the Easter  holiday and an additional weekend in March likely hurt that month’s sales,  making April look better by comparison.

“Since changes to mortgage rules made in 2012 took effect, national sales  have been running nine to 10 per cent below levels posted in the first half of  2012, but they’ve been remarkably steady,” Klump said in a statement.

In Toronto the number of homes sold fell 5.2 per cent compared with April  last year, while in Vancouver sales fell six per cent from a year earlier.

Home sales in Regina fell by 24.2 per cent from a year ago, while those in  Saint John, N.B., were down 21.1 per cent.

Calgary saw a 10.4 increase in house sales compared with April 2012, and home  sales in Windsor-Essex in southwestern Ontario climbed 20.6 per cent  year-over-year.

Meanwhile, CREA’s home price index rose 2.2 per cent in April from the same  month last year, the smallest 12-month gain in more than two years.

The national average price in April was $380,588, up 1.3 per cent from a year  earlier in April 2012.

Read more: http://www.montrealgazette.com/business/Sales+Canadian+homes+edge+April+price+index+rises+slowly/8388017/story.html#ixzz2UeVxG8TQ

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