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April Market Recap

Sales of existing homes in Canada fell 4.4 per cent in April from March as activity dropped off after a first-quarter rush to buy before the introduction of new mortgage rules.

The Canadian Real Estate Association (CREA) said on Tuesday that 36,564 homes changed hands in April, down from 38,263 in March.

The national average price in April rose 8 per cent from a year earlier to a nonseasonally adjusted $372,544, while new listings edged up 1.3 per cent in April from March, CREA said.

The decline in sales came as little surprise as tighter mortgage rules, which took aim at mortgage amortization and refinancing, came into effect early in the spring. CREA said the new regulations probably sidelined a number of first-time homebuyers.

"April's decline in existing home sales shows the impact of the March 18 changes to mortgage rules that lifted existing home sales in Q1 to their highest level in a year as buyers rushed to buy ahead of the change," said Leslie Preston, economic analyst at Toronto-Dominion Bank.

"We don't expect the first quarter's pace to be sustained and April's reading sets the stage for an expected softening."

Canada's housing market has shown resiliency compared with other countries whose markets dived during the financial crisis.

Data on Tuesday showed the U.S. housing market has still not recovered as housing starts and building permits fell in April. Residential construction was crowded out by an oversupply of used homes on the market, in particular, foreclosed properties.


Analysts said the new mortgage regulations contributed to the month's 4.4 per cent pullback, though the impact was hard to measure.

The month's decline left year-over-year sales off nearly 15 per cent. Last year's spring sales may have also been pushed forward by homebuyers wanting to get ahead of the July 2010 introduction of harmonized sales taxes in Ontario and British Columbia, the provinces that are home to the country's most expensive metropolitan markets: Toronto and Vancouver, respectively.

"This makes it difficult to compare the two months in order to reliably gauge the impact of the latest round of mortgage rule changes," Gregory Klump, CREA's chief economist, said.

Overall, analysts predict the housing market -- the sector that led Canada out from recession -- will cool further in coming months because of the new mortgage rules and higher borrowing costs but that it won't drop as much as earlier forecast.

Last week, CREA lifted its 2011 national forecast for home resales to 441,100, a year-on-year decline of 1.3 per cent.

The new estimate compares with the 1.6 per cent year-on-year decline it forecast in February, which itself was revised up from an earlier forecast. It also forecast the average price would rise 4 per cent this year, compared with February's view of a 1.3-per cent rise, largely based on stronger-than-expected sales of multimillion-dollar homes in British Columbia.

CREA's April price figures supported this view, as prices rose 2.5 per cent in the Vancouver area to a seasonally adjusted $801,719 even though sales fell 12.1 per cent in the month. The average Vancouver price was up 21 per cent from a year earlier.

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