Canada's housing marking pulled back from near-record activity during May, the Canadian Real Estate Association said Wednesday.

Home sales slowed from near-record levels in May, the Canadian Real Estate Association says. (Darren Calabrese/Canadian Press)

Seasonally adjusted monthly sales through the Multiple Listing Service came down 9.5 per cent from the frantic April pace, the realtors' group reported. More than 70 per cent of local markets showed declines, but the national drop was essentially due to decreases in Toronto, Vancouver and Ottawa.

National sales activity was down 4.3 per cent in May from the same month last year. And in real terms, not seasonally adjusted, sales activity was down from April — contrary to what normally happens during the popular spring home-buying season.

New mortgage rules that went into effect on April 19 coupled with rising interest rates to pull house sales forward to April, the realtors' association said. "May was the first full month in which sales activity was affected by these changes," stated CREA president Georges Pahud.

"Sales clearly ran into a wall in May in the first full month of the new tighter mortgage insurance rules and following a back-up in borrowing costs," BMO economist Doug Porter commented.

Rise in prices slows

On the price side, the average price of a home rose 8.5 per cent in May over the same month in 2009. That was the smallest year-over-year increase in 10 months.

"Next to no one will complain about some cooling in prices from the unsustainable trends of late last year and in early 2010," Porter said.

"Supply and demand has become more balanced in a number of major markets," CREA economist Gregory Klump said. "Homebuyers now have more choice and are likely be in less of a rush to purchase than they were recently, so the amount of time it takes to sell a home is expected to rise in the coming months."

'Life in the fast lane is over for Canada’s housing market.'—BMO economist Doug Porter

The national inventory level stood at 5.3 months in May, up from 4.8 months at the same time last year. The number of months of inventory is the time it would take to sell current listings at the present rate of sales activity.

A decline in new listings "will keep the market balanced and Canadian home prices stable," Pahud predicted.

"Life in the fast lane is over for Canada’s housing market," BMO's Porter said. "Now the question is whether it will stay in the middle lane, or brake even more aggressively."