Housing sales slump despite low mortgage rates

The malaise in Canada’s housing market is deepening, as record-low interest rates and a vast selection of homes prove to be insufficient incentives to draw new buyers into the market.

Just days after the Canadian Real Estate Association downgraded its sales forecast for the rest of the year, data from British Columbia and Alberta show sharp double-digit decreases in the number of homes sold in July compared to a year ago.

The resale housing market has been at the forefront of Canada’s economic recovery, with prices rebounding sharply from recessionary lows. But the market seems to have peaked, and signs of stress are showing across the country.

In Vancouver and Calgary, sales were down 45 and 42 per cent, respectively, compared to last July. In Toronto, new condo sales showed a quarter-over-quarter contraction for the first time in 16 years.

While the CREA typically aggregates information from each of the country’s 101 real estate boards in the middle of each month, the boards can release sales data on their own sooner.

Vancouver and Calgary reported Wednesday, Toronto is expected to report Thursday.

All of this slippage is happening while mortgage rates remain at record lows, despite constant warnings from economists that they are bound to rise as the Bank of Canada moves its lending rate higher.

Competition among the banks for new business along with falling bond yields have meant mortgage rates have been largely unaffected by any Bank of Canada moves.

"We expected the market to soften because we’ve seen such a flood of listings," said Laura Parsons, a Calgary-based manager at Bank of Montreal who specializes in mortgages. "You can look at this as a bad thing, but affordability has improved for many buyers and rates are still very low."

Even so, buyers are reluctant to come forward. Many bought earlier this year than they may have wanted in order to secure a cheap mortgage, as well as avoid the harmonized sales tax in Ontario and British Columbia, which applies to professional services associated with buying a resale home.

"The market has definitely changed," said Vijay Kumra, an agent at Sutton Group Signature Realty Inc. in Toronto. "I’m taking some people to 40 houses before they finally decide to buy one, if they decide to buy at all. Three months ago, I’d show them one house and they’d buy it right away."

The Real Estate Board of Greater Vancouver said sales were quieter than "most Julys over the past decade." Sales fell 45 per cent from last year, and prices have fallen 2.8 per cent since peaking in April. The average price of a resale home is now $577,074, compared to $593,419 at the peak.

"With the pace of home sales and listings easing off in our market, we’ve begun to see a levelling of home prices from the record highs seen in the spring, creating greater affordability," Jake Moldowan, the board’s president, said in the REBGV report. "Activity in today’s marketplace is clearly trending in favour of buyers."

Many of Vancouver’s 16,431 listings were posted to take advantage of a hot market, said Century 21 president Don Lawby, with half-hearted sellers reluctant to lower their prices. As the market cools, those listings could be pulled and supply and demand would help keep prices stable.

"I think a lot of people bought houses early in the year this year," he said. "What I’m afraid of is people will look at these numbers and say the world is coming to an end and make it look like this market is worse than it really is."

For those committed to selling, however, a weaker market poses considerable difficulty. Annabel Aspler sold her Vancouver condo last year, but it was destroyed by a fire several floors above her unit.

She had already bought and begun to renovate a new place, but her buyer was able to walk away.

The trendy bachelor suite is only now back on the market, and she’s desperately hoping to sell it.

In a month, she has dropped her price twice and she’s still not receiving any reasonable offers. She has racked up tens of thousands of dollars in debt waiting for the sale to close, all of which could be paid back the day after a sale.

"It’s really hard, I don’t survive well in the face of debt," she said. "I originally sold it when the market was good, and then some careless act cancelled the deal. Now I’m trying to sell when the market isn’t good, and it’s not fair."

(prepared by Steve Ladurantaye/Globe & Mail)