BALANCE IN JUNE

Fewer home resales in June in a more balanced market: real estate association
By LuAnn LaSalle
The Canadian Press July 16, 2012

The number of Canadian homes sold last month dropped more than four per cent from the level in June 2011, the first year-over-year decline in sales volume since April 2011, the Canadian Real Estate Association said Monday.

Resales of homes were also down 1.3 per cent in June from May — the second month-to-month decline — with a total of 46,444 transactions through CREA members. That was down from 48,591 in June 2011, the association said.

"Canada's housing market lost a little altitude in June, but it's still flying pretty high," association president Wayne Moen said in a news release.

"That said, sales activity and average prices bucked the national easing trend in a number of markets, which underscores that all real estate is local," Moen said.

The national average home price in June was $369,339, down 0.8 per cent from the same month last year, CREA said.

Prices increased in Calgary, remained strong in Toronto and continued to slow in Vancouver.

However, CREA said its MLS Home Price Index — which the association says is a better measure because it adjusts for different types of properties sold — increased 5.1 per cent between May and June 2012.

There have been several reports saying some real estate markets and some types of housing are over valued, although there's a range of opinions about how much and how quickly prices will decline.

Economists and consumers have been closely watching for signs that demand has softened to the point where prices will start going down.

But the association, which represents real-estate boards and associations that handle most of the country's property transactions through the MLS system, said Monday the decline in sales activity and an increase in new listings resulted in a "more balanced" national housing market in June.

The number of newly listed homes rose 1.4 per cent in June compared to May, led by the Toronto market. Some 42 local markets, out of 100 markets across the country, registered a monthly increase in new listings of at least one per cent, the association said.

RBC senior economist Robert Hogue noted the resale market eased again in June but the number of homes newly listed for sale rose 1.4 per cent last month.

"Market conditions, therefore, eased a little, providing more breathing room for Canadian buyers," Hogue said in a research note.

"Despite this easing, the demand-supply equation continued to be balanced in the majority of markets in Canada. The previously tight Toronto market became much more balanced, whereas the Vancouver market inched closer to conditions favouring buyers," Hogue said.

In the first half of 2012, a total of 257,193 homes traded hands over Canadian MLS Systems, up 4.7 per cent from the same period in 2011.

Gregory Klump, CREA's chief economist, said home buyers didn't rush to make purchases before the latest restrictions on mortgage regulations came into effect in July.

"That's a big change compared to what we saw as a response to previously announced changes," Klump said.

"It will take some time before the compound effect of previous and recent changes to regulations on Canada's housing market becomes apparent."

Hogue also said that going forward this year he expects home resales to ease in light of the latest mortgage restrictions.

"This moderation trend will become more entrenched next year when we expect the Bank of Canada to begin normalizing its interest rate policy."

Under new mortgage rules announced in June by Finance Minister Jim Flaherty, borrowers will be allowed to use up to 80 per cent of their property's value as collateral for home-equity loans, down from 85 per cent.

In addition, the maximum amortization period dropped to 25 years from 30 years for government insured mortgages.

Flaherty also said government-backed mortgage insurance will be limited to homes with a purchase price of less than $1 million.

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