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Canada’s housing market is showing signs of cooling, after years of booming sales and rising prices.
The average price of homes fell 0.3 percent in May from the same time last year, the Canadian Real Estate Association said on Thursday.
Housing activity is also showing signs of cooling, with the number of sales falling 3.1 percent in May compared to April -- marking the first monthly decline since January. The number of home sales remains 9 percent higher than last year.
CREA also says housing activity remains slightly above five- and ten-year averages.
“Returning to an average level of sales activity still leaves Canada’s housing market in great shape,” Wayne Moen, CREA president, said in a statement. “The expected continuation of low interest rates will keep housing markets stable and homeownership affordable and within reach for many buyers in the months ahead.”
TD’s David Tulk says Canada’s housing market is in for a slowdown.
“This report reflects the trend towards a moderation in the housing market that we believe will be consistent with a soft landing,” he says. “Lending rates still remain quite accommodative and the theme of rising household leverage remains a key risk to the wider economy.”
CREA also updated its forecast for 2012 and 2013. It now expects housing activity to reach 475,800 units in 2012, up 3.8 percent from 2011. Sales for 2013 are expected drop 1.1 percent to 470,200 units in 2013.
CREA expects the average home price to increase by 2.2 percent to $370,700 in 2012 -- up from its previous prediction of a 1.1-percent decline.
Canada did not experience the housing market crash that drove the United States and other Western countries into recession. While the Canadian market did retreat in 2008, it rebounded swiftly on the back of the low interest rates that have continued to drive activity.
The prospect of rising rates has spurred concern that the market's eventual pullback could be a harsh one.
The Bank of Canada warned on Thursday that the housing market and high household debt - much of which is tied to home purchases - are the two biggest domestic risks to Canada's economic outlook.
The federal government housing agency said on Thursday it saw the market cooling toward the end of 2012.
With files from Reuters