After long boom, Canada's housing shows some cooling signs

By Julie Gordon and Andrea Hopkins
VANCOUVER/TORONTO, May 30 (Reuters) - Seven years into a
Canadian housing boom that many have warned will end in a bust,
there are signs of a sales slowdown in the two hottest cities,
with some economists and real estate agents saying the peak has
passed.
A cooling of sales activity in Toronto and Vancouver, the
two tent poles holding up an otherwise soggy national housing
market, could bring the two markets into line with the rest of
the country's tepid economy.
It would be welcome news to homebuyers who have struggled to
win bidding wars in the two cities, which represent about 54
percent of the Canadian housing market. Even some real estate
agents welcome the idea of a calmer market.
"A few months ago the dogs - the less desirable units that a
year ago nobody was bidding on - they were going with multiple
offers ... that's definitely slowed," said Pete Shpak, a
Vancouver agent.
"I have seen a couple (homes) lately, though, that I thought
would go into multiple offers, but didn't," he added.
Prices are still up dramatically over the past five years in
both cities, rising 41 percent in Vancouver and 45 percent in
Toronto, according to the Canadian Real Estate Association
(CREA).
But seasonally adjusted residential sales in Toronto fell by
1.8 percent in March from February and were flat in April, while
Vancouver sales slipped 0.3 percent in March and 1.0 percent in
April. Activity was still well up from a year ago.
"There are reasons to believe maybe we've hit the peak in
those two markets," Gregory Klump, chief economist for CREA,
said on Friday. "But I expect them to remain strong."
Some economists said U.S. interest rate hikes expected later
this year could drive up Canadian bond yields and mortgage
rates, helping cool sales.
Desjardins senior economist Benoit Durocher sees a lack of
affordability ending the boom in Toronto and Vancouver, where
prices have far outstripped income gains.
"Since prices are so high, you have fewer buyers in the
market and fewer transactions. I think it is the first step
before an adjustment in the price," said Durocher, who expects
national prices to drop 3 percent in 2017.
Klump and others also blame limited new listings for
stalling monthly sales growth, as some homeowners who would like
to cash in fear an inability to move up.
"It's a vicious circle. As people consider selling, it might
be very difficult to find a home to meet their needs. We haven't
seen as many listings as you would expect based on price
growth," said Jason Mercer, director of market analysis at the
Toronto Real Estate Board.