Canadian home sales continued to fall in April, dropping 2.9 per cent month-over-month and 13.9 per cent year-over-year, according to new data released by the Canadian Real Estate Association (CREA) today. Economists are pointing to the new mortgage stress test as the cause of the national slump, but some markets are being hit harder than others.
“This year’s new stress test has lowered sales activity and destabilized market balance for housing markets in Alberta, Saskatchewan and Newfoundland and Labrador Provinces,” writes CREA chief economist Gregory Klump, in a statement.
Klump writes that the provinces, which have faced economic difficulties tied to natural resources, have been harder hit by the test.
Sales fell by 6.1 per cent month-over-month in Calgary, while prices in Edmonton were down 0.9 per cent year-over-year. Prices where down 6.5 and 3.4 per cent year-over-year in Regina and Saskatoon, respectively.
“This was a disappointing report,” writes TD economist Rishi Sondhi, in a note. “Sales fell during April while revisions to March painted a weaker picture of activity than originally thought. Activity continues to be negatively impacted by higher mortgage rates, the [new mortgage stress test] and, in some markets, provincial regulation.”
Currently the national sales-to-new-listings ratio sits at 53.7 per cent, up from 52.6 per cent in March. A ratio of between 40 and 60 per cent is considered balanced, with readings above and below indicating sellers and buyers markets, respectively.
Moving forward, Sondhi predicts that the stress test will continue to weigh on housing activity, but writes that things likely won’t be as cool as they were at the beginning of the year.
“We don’t expect the outsized declines in activity that were observed in the first quarter to be repeated,” he writes. “Ultimately, signs of stabilization should emerge later in the year and into 2019, amid healthy labour markets and ongoing population growth.”