Canadian housing hits the wall

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Canada is one of the last bubble markets to hit the wall. Buoyed by the commodities boom in the west, Canada looked set to keep on an upward path even while its largest trading partner, the U.S. had already started to see a bust. But, evidence of the housing slowdown is everywhere in Canada.

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Will this be a US-style crash or a easing from a high plateau? If one listens to the happy talk from the Canadian Real Estate Association (CREA), one might think Canada is set to resume the upward path shortly. However, to my ears, this chatter sounds eerily reminiscent of the denial we witnessed in the UK and the U.S. before.

First it was Canada’s top 25 markets that were feeling that pain from a slowdown in housing, now it’s clear the malaise has hit the entire country.

Two weeks ago statistics from the Canadian Real Estate Association showed the average sale price of a house in the country’s 25 largest markets was down 0.4% last month from a year ago.

New statistics released Monday show housing across the country is now losing out to inflation. The average sale price of a home in Canada last month was $314,028, a tiny $35 increase from a year ago. For the first six months of the year, prices were up 3.6% from a year ago.

“In essence, Canada’s housing market has pulled back from the record-setting pace set in 2007, but in most provinces it continues at or near sales levels set in the years before that,” says Calvin Lindberg, president of CREA. “The increase in housing prices is also pulling back from the record-setting pace of last year, but we have yet to see any of the price contractions that have impacted the housing market in the United States.”

CREA said there is plenty of good news in the numbers. For the fifth straight year, more than a quarter of a million units were sold in Canada. However, sales over the first six months of the year are down 13.1% from a year ago.

National Post, 28 Jul 2008

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