Canada's Housing Shows Some Signs of Cooling

Some economists and real estate professionals are saying the peak has passed. According to them, there are signs of a sales slowdown in the two hottest cities in the country.

The cooling of sales activity in Toronto and Vancouver would work in favour for those who have struggled to win bidding wars in these two cities.

According to the Canadian Real Estate Association, prices are still up dramatically over the past fives years in both Toronto and Vancouver. However, seasonally adjusted sales in Toronto dropped by 1.8 per cent in March from February. In Vancouver, sales decreased 0.3 per cent in March and 1.0 per cent during the month of April.

Several economists stated that U.S. interest rates could play a part in helping cool sales in Canada as they are expected rise later this year. This can influence Canadian bond yields and mortgage rates.

Senior economist from Desjardins, Benoit Durocher predicts a lack of affordability of housing will end the boom in Vancouver and Toronto. Housing prices in both of these cities have far exceeded income gains.

Benoit stated that when prices are so high, there are fewer buyers in the market and fewer transactions. He believes it is the first step before an adjustment in the price who expects national prices to drop 3 per cent next year.

Gregory Klump, CREA's chief economist, said lack of new listings are affecting monthly sales growth.

Jason Mercer, Toronto Real Estate Board's director of market analysis said it is a vicious circle where people who are considering selling their home may find it very difficult to purchase a home that meets their needs and wants. He also mentioned that there aren't as many listings as one would expect based on housing price growth.

Reference:

Financial Post

http://business.financialpost.com/…/after-long-boom-canadas…