TORONTO - For the first time in nearly a decade, house prices in Canada recorded their first year-over-year decline in June, as certain formerly hot local markets cooled and the number of new listings rose, the Canadian Real Estate Association reported Tuesday.
The number of new listings by CREA's members in June rose to 56,639, up 6.2 per cent from the year-earlier period. The number of sales of existing homes fell by 15 per cent to 30,751, however, resulting in an increase of unsold properties on the market.
Gregory Klump, the association's chief economist, said the small decline in the average price was the first since early 1999 and reflects a slumping economy and the huge runup in prices in recent years in Alberta's energy-based economy.
In June, the major market MLS residential average price edged down 0.4 per cent year-over-year to $341,096, the association said in its latest Multiple Listing Service statistics.
"The size of price increases has been moderating this year," said Klump in an interview. "This is actually the first monthly year-over-year decline in average prices since January 1999."
Klump said the slight decline in average price comparisons reflects the impact of the surge in average prices experienced last year in Calgary and Edmonton.
The real-estate group said the average price in these markets has stabilized since March this year in line with a balanced market.
"That decline really reflects the impact that Calgary and Edmonton had on the overall situation last year," said Klump
"But that said, in the next couple of months we'll be back in positive territory because the Calgary and Edmonton markets have stabilized," said Klump.
Avery Shenfeld, senior economist at CIBC World Markets, said there has been a noticeable softening of the Canadian housing market over the past few months.
"Some of that is coming in cities where prices had gone through the roof in the previous one or two years," he said. "So we have to take small retreats in some of those markets with a bit of a grain of salt."
Douglas Porter, an economist with BMO Capital Markets Economics, said in a note to clients that housing market activity continued to slide in June, "as wobbling consumer confidence triggered another double-digit decline in sales."
Sales of existing homes fell by 15 per cent from a year earlier, "a bit deeper than the average 13.3 per cent drop over the first half of the year."
"The sales declines were broad as Vancouver, Calgary and Toronto all fell heavily in the past year."
Nevertheless, across the country during the first half of the year, and despite the decline in June, the average price of a house set new records, according to the MLA statistics.
The average price of a dwelling rose 3.2 per cent year-over-year to $340,390 during the first half.
On a quarterly basis, the average price in major markets was $343,235 in the second quarter, up 1.4 per cent from the second quarter last year.
Meanwhile, new listings of homes for sale in major markets -- such as Toronto, Vancouver, Ottawa, Regina and Saskatoon -- reached record levels in the first half of the year while sales declined, CREA said.
The MLS statistics showed new listings numbered 332,958 units in the first six months of 2008, up 8.1 per cent from the previous record set in the same period last year.
Transactions declined 13 per cent from the record pace of a year earlier, to 169,265 units.
"There's been a great many more listings in the first half of this year than previously and that's really bringing the market into better balance," commented Klump.
"Buyers have more product from which to choose and as a result there's a less frenzied pace, especially when compared to last year's breakneck pace."
As to why houses are not selling, said Shenfeld, there are various reasons. But essentially "it's a very different story in different parts of the country."
"In some parts of the country there's justifiable caution on the economic picture," especially in Ontario where the export-led manufacturing sector has been hard hit by the slowdown in the United States brought on by the worldwide credit crunch and subprime mortgage fiasco.
"In other parts of the country, we may be seeing buyer resistance after some huge unprecedented prices increases" over the past few years, said Shenfeld.
Said Porter, "coming amid the trauma in equity markets, the rolling credit crisis, and lofty energy costs, news that Canadian home prices are now in retreat is the latest skunk at the economy's summer picnic.
"While the small year-over-year drop in June overstates the weakness in prices, there is no debating that there is now a serious chill in Canada's housing market after a six-year boom."
MLS new listings topped 50,000 in June for the third time in as many months.
Looking forward to the second half of the year, said Klump, "we expect new listings to remain high and sales activity is expected to continue to moderate."
As for the price increases, "they are expected to erode affordability," he said
In October, the Canada Mortgage and Housing Corp.'s new mortgage default insurance rules come into effect.
"That will further erode affordability at the margins," said Klump.
"We do anticipate that sales will gradually continue to ease back from the breakneck record pace that was set last year."
With new listings remaining high, CREA is "looking at an increasingly more balanced market that will be characterized with smaller price increases than we've seen in the first half of this year," said Klump.
On a regional basis, said Klump, "there's only been a few markets in which we've seen the year-over-year decline in average prices.
"Calgary and Edmonton are the ones that stand out," he said.
In the Maritimes, on the other hand, "things are quite strong," said Klump.
In St. John's, for example, "it's still a sellers market," said Klump. "It's not as tight as it was a few months ago but it's still very much a seller's market."
Demand, he said, "continues to remain very strong with listings unable to keep up with the demand. New listings there have been gradually trending higher but sales really stand out as being on an up trend."
In Ontario, prices are also going up, he said.
