There are signs of a “spring thaw” in Canada’s housing market, but economists say there’s no comeback in the works as overall activity continues to cool.
Newly released data from the Canadian Real Estate Association (CREA) says sales of exiting homes fell 3.1 per cent in April compared to the same month last year, with transactions down in about 60 per cent of local markets.
That compares with a 15-per-cent year-over-year decline in March, with transactions down in more than 90 per cent markets – a drop CREA attributed to the Easter holiday and an extra full weekend at the end of the month in 2013.
The average sale price of a home across Canada rose 1.3 per cent in April compared to a year ago, or to $380,588.
In the shorter term, home sales across Canada rose 0.6 per cent in April as compared with March, while the number of newly listed homes fell 0.9 per cent month-over-month.
Economists say the numbers are encouraging heading into the popular spring home-selling season.
“We are continuing to see signs of a spring thaw in the Canadian housing market,” said TD Bank senior economist Sonya Gulati, who also tempered expectations.
“While there are signs of promise in the housing market, it is important to clarify expectations," Gulati added. "We do not anticipate a marked revival in the Canadian housing market in the months ahead. There simply is no economic impetus for a full-fledged comeback in the cards."
She forecasts the spring home-buying season will be "mediocre at best.”
The cautious outlook was supported by the latest MLS Home Price Index (HPI) data, which shows a 2.2-per-cent rise in April, compared with a year earlier.
“This marks the eleventh consecutive month in which the year-over-year gain diminished and the slowest growth rate in more than two years,” according to CREA, which sees the HPI data as the best gauge of Canadian home price trends
The gradual cooling off of Canada's housing market is driven in part by tighter mortgage rules imposed by Ottawa to prevent a potential market crash similar to what happened in the U.S. starting around 2008.
“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,” said CREA, which also called Canada’s housing market “balanced.”
The CREA data comes a day after the Teranet-National Bank House Prices survey showed house prices in 11 cities rose month-over-month in April, but the annual growth rate fell to 2 per cent from 2.6 per cent, to a 3.5-year low.
“As home sales continue to fall, we expect house prices to eventually start to decline,” Capital Economics economist Amna Asaf said in a note.