Home sales soften in January

After a strong finish to 2011 from a home sales perspective in Canada, 2012 got off to a more meager start, a new report suggests.

According to statistics recently released by the Canadian Real Estate Association, home sales activity fell 4.5 per cent from December to January, marking the first monthly decline in property purchases since August. In addition, it was also the largest dip in home sales in nearly a year and a half.

The slowdown ends what was an ongoing streak of monthly increases in property purchases, putting sales back in line with where they were between July and September of last year.

Gary Morse, CREA's president, said the more stable home sales market may be a sign of what's to come, especially considering reports suggesting the economy may be contracting.

"Forecasts for economic and job growth going forward vary widely for different parts of the country, suggesting a possible continuation of a softening trend in some markets," said Morse.

He added, however, that because all real estate is local, other parts of the country may see a rise in demand depending upon how strong market fundamentals are in a given area.

For January, though, home sales purchases were down in more than half of the markets surveyed, especially in the Greater Toronto Area and Montreal. Fraser Valley, Calgary, Edmonton, Winnipeg, Ottawa and Greater Vancouver were other urban localities that showed signs of weakening, CREA reports.

Also thinning was the number of new listings on the market, as newly listed homes dropped by more than 1 per cent in January from December, following a month in which listings increased nearly 3 per cent. Despite the downturn, inventory levels stood at six months nationally, up slightly from December and on par with where they were in October.

Part of the reason why fewer people appear to be buying may have something to do with average home prices, despite record low mortgage rates.

According to Statistics Canada, new home prices rose 0.1 per cent in December, with the most significant increases coming from the Toronto Oshawa metro areas, followed by Montreal.

On a year-over-year basis, Toronto and Oshawa also recorded the largest home price growth, up 6.3 per cent in both, 5.3 per cent in Regina and 4.6 per cent in Winnipeg.

January followed suit in terms of home price increases in the resale market, as CREA, notes that the average selling price jumped 1.6 per cent last month.

"Year-over-year comparisons in the national average price are expected to become volatile and may turn negative, reflecting average price developments in the first half of 2011 in Vancouver," said Gregory Klump, chief economist at CREA. "At that time, high-end home sales in Vancouver's priciest neighbourhoods surged to all-time record levels, which skewed the national average price upward considerably."

He added that the turbulent price trend is not expected to continue in 2012.