* Home sales up 0.6 percent in April from March, down 3.1
percent on year
* Price index rose 2.2 percent in April
* Economists see stabilization in housing market
By Andrea Hopkins
TORONTO, May 15 Canadian home sales rose in
April, the second straight monthly gain, as spring homebuying
breathed life back into the slowing real estate sector and
bolstered hopes Canada will manage a soft landing rather than a
U.S.-style housing crash.
Sales of existing homes climbed 0.6 percent in April from
March, but year-over-year sales were down 3.1 percent, the
Canadian Real Estate Association said on Wednesday in a report
that showed a spring bounce in a housing sector that had been
slowing since the middle of 2012.
"Realizing that it may be a tad premature for victory laps,
but evidence continues to mount that the Canadian housing market
seems to have pulled off the fabled soft landing," Doug Porter,
chief economist at BMO Capital Markets, said in a research note.
CREA's home price index rose 2.2 percent in April from a
year earlier, its smallest gain in more than two years. That
echoed the 2.0 percent April gain in the Teranet-National Bank
Composite House Price Index reported on Tuesday.
Prices, still above year-ago levels in most markets,
typically lag a slowdown in sales activity as sellers resist
pressure to lower asking prices and wait to see whether the
market is truly declining.
"It is on the price side where the stable nature of the
market is perhaps most evident. Despite the very loud gnashing
of teeth and excessive wringing of hands for well over a year on
the topic, Canadian home prices remain incredibly calm, cool,
and collected," Porter noted.
Major indices for Canadian home prices are up between 1.3
percent and 2.2 percent from year-ago levels, Porter said,
noting that is faster appreciation than inflation, with prices
still at record highs.
Canada's housing market began slowing in the middle of 2012,
when the government tightened lending rules in a bid to prevent
consumers from taking on too much debt.
"Today's report further underscores our argument that
tighter mortgage regulations have a transitory impact and the
expectation for stabilization in the housing market. We expect
this theme will persist over the balance of the year and into
2014," Mazen Issa, Canada Macro Strategist at TD Securities,
said in a research note.
He said the key markets of Toronto and Vancouver look more
balanced after a period of moderation, which will help limit the
downside in prices.
The April month-on-month uptick in sales was the second
straight monthly gain. CREA said home sales improved in more
than half of all local markets in April from March, led by gains
in Toronto, Winnipeg, Calgary and Victoria.
There was some noise in the data. CREA chief economist
Gregory Klump said the Easter holiday and extra full weekend in
March lowered sales activity that month and boosted April sales.
The CREA report showed the national sales-to-new listings
ratio inched up to 50.4 percent in April from 49.7 percent in
March. It has held near the same level for the past nine months.
Nationally, there were 6.6 months of inventory at the end of
April 2013, unchanged from the end of March.
The national average price, not seasonally adjusted, for
homes sold in April was C$380,588 ($374,600), up 1.3 percent
from the same month last year.
A separate report showed manufacturing sales fell
unexpectedly in March, reverting to a trend of lackluster
performance in line with modest economic growth.
The manufacturing sector has been too sluggish for comfort
since the 2008-09 recession and Statistics Canada data confirmed
that the lackluster trend continued in March.
However, an increase in the volume of factory sales in the
month may lift first-quarter economic growth more than expected.
First quarter GDP figures are due on May 31.
Factory sales fell 0.3 percent in March from February to
C$49.5 billion ($48.5 billion), below market estimates of a 0.6
percent gain and dragged down by lower prices for energy
products and a slump in fertilizer sales.
The setback came after sales had surged 2.8 percent in
February, the biggest gain since July 2011.
In the first quarter, manufacturing sales slipped 0.3
percent and the total value of sales remain below their
However, much of the decline was due to lower prices and in
volume terms sales actually rose 0.2 percent. This will help
deliver the "first upside surprise to growth in a year," said
David Tulk, a strategist at TD Securities.
TD sees first-quarter growth of between 2.2 percent and 2.5
percent, annualized, compared with the central bank's latest
estimate of 1.5 percent growth.
"While we are bracing for a slower quarter in Q2, the wider
narrative for a slow yet sustained recovery over the second half
of the year, driven in large part by net exports, remains
intact," Tulk said.