Home sales drop in January as new mortgage rules take effect

Galtero Lara
Febrero 15, 2018

The Canadian Real Estate Association says home sales across the country fell by 14.5 per cent between December 2017 and January 2018.

Economists and real estate professionals had largely anticipated a significant pullback in home sales in January, after home buyers and sellers hurried to finalize property purchases before Jan. 1, when new, stricter federal mortgage rules came into effect.

"The decline in January sales provides clear evidence that the strength in activity late previous year reflected a pull-forward of transactions, as rational homebuyers hurried to purchase before mortgage rules changed in 2018", said Gregory Klump, the association's chief economist. New supply was down in about 85 per cent of all local markets, led by a drop in the Greater Toronto Area, CREA said.

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The sharp drop means sales have reached their lowest level in three years despite being on par with the 10-year monthly average. The average price of a home rose by 2.3 per cent when compared with a year ago at just over $481,500.

The number of newly listed homes plunged 21.6 per cent in January to the lowest level since the spring of 2009, the report showed. Nevertheless, a few markets saw a year-over-year jump in sales, including Vancouver, Edmonton, Montreal and Halifax. A ratio of between 40 and 60 per cent is considered balanced, while readings below and above are considered buyers and sellers markets, respectively.

The new mortgage rules created uncertainty and confusion for homebuyers, said CREA President Andrew Peck in a statement. "Unless these supply shortages are addressed, concerns will persist".

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