Canada's summer surge in home sales slows as interest rate fears abate
Drop in sales in October is not indicative of a long-term trend in the market, say analysts
Sales of existing homes in Canada declined in October from September, suggesting the summer surge in sales was boosted by homebuyers who jumped into the market amid the threat of rising mortgage rates, dampening demand as the year draws to a close.
The Canadian Real Estate Association said on Friday sales activity was down 3.2 per cent last month from September, ending a string of monthly gains that began in the spring.
The industry group for Canadian real estate agents said October's decline returned activity to near where it stood in the middle of last year, before the government tightened mortgage lending rules to cool the nation's red-hot housing market.
"While the decline in new listings points to waning momentum, one off month for sales does not make a trend, as the substantial decline in October appears to be payback from earlier in the summer when sales activity was brought forward to lock in mortgages before further increases," said Mazen Issa, Canada macro strategist at TD Securities.
"As such, we are inclined to look through the weakness of this report and focus on the longer- term trend, where we see the theme of stabilisation in the housing market carry the day."
The housing sector has been a major driver of Canadian economic growth coming out of the recession, but the market has been plagued by worries it has over-extended itself and is due for a correction.