Rebound? What rebound??

The Canadian housing market has been weakening since this time last year.  After reaching dizzying heights early in 2017, the market was pushed lower first by the imposition in April of new controls by the Province of Ontario, then by the start in July of the long-awaited Bank of Canada policy tightening cycle, and finally, since the start of this year, by new rules designed to limit mortgage availability for highly-indebted buyers.

Realtors, as is their wont, have remained confident that once these one-time factors have been taken on board by buyers and sellers, prices and activity will stabilize and then start to move higher again, likely by the middle of this year.  Market data for March, just released by the Canadian Real Estate Association, cast a long shadow over that rosy scenario.  Home sales agreed in March fell 22.7 percent from a year ago, with Montreal and Ottawa the only major cities posting gains. Sales for the first quarter as a whole were the lowest for any quarter since 2014. 

In terms of prices, the national average fell 10.4 percent, led by the Toronto and Vancouver markets.  Unsurprisingly these are the cities that led the prior unsustainable run-up in prices, and both have been targeted by their Provincial governments with measures aimed at cooling the market.  Excluding those cities, the national average home price is down by a much more modest 2 percent year-on-year.

Before we draw too many conclusions about the outlook for the rest of the year, it is worth recalling that the winter months are traditionally by far the slowest all across Canada for the housing market, for obvious reasons.  Sales generally pick up once the snow melts.  However, the normal seasonal  rebound may be late in arriving this year, as temperatures from the Rockies to the St Lawrence have been far colder than usual for the last several weeks. 

Even when warmer temperatures finally arrive, it may take some time before prospective buyers forget the key lessons that the past year's market action should have imparted: prices can go down as well as up, and sometimes you can score a better deal just by waiting a while.  Remarkably, and in defiance of precedent, it looks as if the authorities may have found a way to prick a housing bubble without triggering an outright collapse.