Canadian existing home sales continued to weaken in December, plunging 17.4 per cent year-over-year (y/y), the steepest fall since October 2010. While the headlines will no doubt highlight the annual decline, sales were down a more modest 0.5 per cent in seasonally-adjusted terms from November, though that’s still the seventh drop in the past eight months. Since July, when the tighter mortgage insurance rules took effect, sales have dropped 6.6 per cent. For all of 2012, sales are down 1.1 per cent, driven by the softness in the second half of the year. Almost every city on the list saw double-digit declines at year end, led by Vancouver’s 31 per cent slide. Calgary was the only bright spot with sales up 7.2 per cent y/y. New listings fell 1.3 per cent (sa) in December, to its lowest level since March 2011, lifting the sales-to-new listings ratio a bit to 50.8 per cent, still firmly in balanced territory.
While sales have skidded, average prices are holding up nicely, rising 1.6 per cent y/y. The gain suggests the sales figures may be overstating the weakness in housing. Indeed, the price figures are much more encouraging with only a handful of cities seeing declines, including Winnipeg (-4.2 per cent y/y) and Vancouver (-0.8 per cent y/y). For all of 2012, average prices rose 0.2 per cent, a four-year low. The MLS Home Price Index, which adjusts for the mix of homes sold, eased to +3.3 per cent y/y in December, the slowest pace since April 2011. Prices (according to the MLS measure) slipped 1.5 per cent in the second half of the year, since the July mortgage insurance tightening, with all major regions except Calgary declining over that period.
The Bottom Line: The Canadian housing market continues to cool. While some will focus on the deep dive in sales from a year ago, it looks as though prices are providing a better read on the health of the sector, as homeowners are in no rush sell. Prices are easing gently, consistent with a soft landing through much of the country.