Further evidence of a slowdown in Canada’s housing market.

Lower home sales in November have prompted the Canadian Real Estate Association to cut the sales forecast it released in September for this year and next.

The association said today that sales over the Multiple Listing Service fell 1.7 per cent from October to November, with activity last month coming in 11.9-per-cent lower than last November.When it released its forecast in September the market was just showing the first signs of a slowdown, but it now expects the decrease in demand to persist, it added.

“Lower than projected third quarter sales have downgraded the prospects for activity this year in almost every province,” the association, which represents realtors across the country, said as it updates its projections. It also suggested that the continued slowing is the direct result of Ottawa’s decision to tighten mortgage rules this summer.

“Interest rates have remained low and the economic backdrop has remained supportive for housing activity, so that should leave little doubt that recent changes to mortgage regulations are responsible for having cooled activity,” said CREA’s chief economist Gregory Klump.

The slowdown is beginning to show up in prices, which have lost their momentum. The national average price of houses that sold in November came in 0.8 per cent lower than a year ago. The MLS Home Price Index, which seeks to account for changes in the type of houses sold, rose by 3.5 per cent, its smallest increase since May 2011.

CREA now expects resales of existing homes across the country to come in at 456,300 units this year, down 0.5 per cent from last year and nearly one per cent below the ten-year average.

In September the association said it expected resales to rise by 1.9 per cent this year to 466,900 units, a figure that it had already revised down.

There are regional variations to the trend. Alberta is expected to see a 13.1-per-cent rise in sales this year, while British Columbia will see a 10.7 per cent decline.

CREA now expects next year’s sales over the MLS system to come in at 447,400 units, down 2 per cent from this year. In September it estimated that that number would be 457,800 units – again, a figure that it had already revised downwards.

“The continuation of moderate economic, job, and income growth will temper the impact of recent mortgage rule changes, which are not expected to dampen activity much more than has already been felt until interest rates are expected to begin rising in late 2013,” the association stated in its new forecast.

It now expects the national average home price will rise by 0.3 per cent for all of 2012 to $363,900. Most provinces should see higher increases than that, but a decline in sales of more expensive homes in British Columbia and Ontario is weighing on the average, it said.

CREA also said Monday that the number of newly listed homes in Canada fell 0.9 per cent in November from October, with Greater Vancouver posting the largest decline.

“With sales and new listings moving in the same direction and by similar magnitudes, the national sales-to-new listings ratio was little changed at 50.3 per cent in November compared to 50.7 per cent in October,” it added. “Based on a sales-to-new listings ratio of between 40 to 60 per cent, three out of every five local markets were in balanced market territory in November.”

Sales have now contracted in eight of the last 11 months, and the decrease compared to last November is “hefty,” Toronto-Dominion Bank senior economist Sonya Gulati said in a note.

The slowdown in both prices and sales is most noticeable in Toronto, Montreal and Vancouver, she added, saying those cities “are more vulnerable to experience a greater-than-average housing adjustment.”

Nationwide, TD expects market conditions to stabilize early next year “as tighter mortgage rules loosen their grip on market trends and low interest rates lure homeowners back into the market,” the note said.

Source: Tara Perkins, The Globe and Mail

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