Average home price drops 5.1 per cent

LORI McLEOD,  Globe and Mail Update

The average price of an existing home in Canada fell by 5.1 per cent year-over-year in August, the steepest decline since 1996.

It was the third monthly drop since prices fell into negative territory in June for the first time in more than nine years, and was led by a sharp decrease in sales activity in the country's most expensive markets, including Vancouver, Victoria and Calgary.

That put the average price of a resale home in Canada at $316,052 last month, according to data released Monday by the Canadian Real Estate Association (CREA).

In Vancouver, the country's priciest housing market, unit sales plummeted by 54 per cent and prices dropped more than 5 per cent from the year before to an average of $557,114, CREA said.

The drop in sales gave Vancouver a lower weighting in the overall calculation of the country's national home price average, CREA said.

Prices also fell in Calgary, Edmonton, and Victoria, cities which saw dramatic run-ups during the housing boom, and in Windsor-Essex, which has been hard hit by the slump in the auto manufacturing sector.

Economists are sticking with the view the housing market decline won't become as dramatic here as in the United States, but said Canadians should brace for a continued slowdown in sales activity and softer prices.

“Canada's housing market continues to face strong headwinds from declining confidence, low affordability and an upward trend in new listings,” Robert Kavcic, economic analyst at BMO Nesbitt Burns Inc., said in a research note.

Resale home prices continued to rise in 20 of the 25 major markets included in the data. However they edged up by only a slight 0.8 per cent in Toronto, the country's largest market with more than double the sales of the second busiest city by activity, Montreal.

The largest price increases were mainly in smaller markets, led by Regina and Newfoundland and Labrador.

Across Canada unit sales also fell, dropping by 19.3 per cent in August compared with the year before with increases in just three markets, Edmonton, Québec City and Thunder Bay.

Besides Vancouver, sales fell sharply in Victoria, Saskatoon, Regina and Calgary, and in a number of Ontario cities including Toronto.

After surging for four months, new listings eased below the 50,000 mark in August, dropping by 4.6 per cent from the year before to 44,377 units.

“This report underscores the current shift in the Canadian housing market, as the tone of activity moves slightly closer to a buyer's market,” Millan Mulraine, economics strategist at TD Securities Inc., said in a research note.

New listings dropped the most in markets that started slowing the earliest, including Edmonton, Calgary and Windsor-Essex. Listings rose the most in Regina, Saskatoon and Thunder Bay.

Despite the overall drop, annual listings growth is still outpacing sales in 22 of 25 major markets across the country, and the ratio of new listings to sales remains near a nine year high, Mr. Kavcic said.