A rush of buyers eager to get into the housing market ahead of new mortgage rules in March caused home sales to drop in April, new data revealed Tuesday.
The Canadian Real Estate Association said April home sales declined 4.4 per cent from March. Declines were largest in some of Canada’s more expensive and active markets, including Toronto, Vancouver and the Fraser Valley, the agency said.
On March 19, new federal government rules came into play that effectively eliminated 35-year mortgages. That spurred first-time homebuyers — who often like the flexibility of lower monthly payments that go along with long amortization periods — to rush to buy before the deadline.
"Changes to mortgage regulations that took effect in April 2011 likely sidelined a number of first-time homebuyers," CREA's chief economist Gregory Klump said.
Year-ago comparisons were even worse. Changes to mortgage regulations and "transitory factors" such as the HST and speculation about rate hikes boosted sales that month higher than levels seen in subsequent months.
As it stands, sales in April 2011 were 14.7 per cent below sales in the same month a year ago.
It was a different story on the price side, however, as the national average price for homes sold on the agency's Multiple Listings Service was $372,544 in April 2011, up eight per cent from the same month last year and roughly 0.3 per cent higher than the $371,286 average of March 2011.
It was the third consecutive month that the average price has gained by eight per cent compared to the same month a year earlier.
The combination of lower sales and higher prices means in a nutshell that there are fewer buyers now than there were last year but those who buy are paying more.
CREA's latest forecast expects prices to increase by about four per cent this year, but the national average is artificially inflated by Vancouver's red-hot housing market.