New mortgage rules blamed for decline in national home sales

The Conference Board of Canada is blaming the federal government’s new mortgage rules for a cooling off of the Canadian housing market.
It’s a position that is supported by the Canadian Real Estate Association (CREA).
CREA chief economist Gregory Klump said the decline in August residential sales across the nation provided the “first clear indication that the recent changes to mortgage regulations aimed at cooling the market are working as intended.”
According to the report recently issued by the Conference Board, a widespread drop in sales followed the latest tightening of mortgage lending regulations. 
In August, sales of existing homes fell from July volumes in 21 of our 28 markets. The dips were five per cent or more in 16 of these. August sales trailed their year-earlier level in 20 areas.
But in Winnipeg, August MLS® sales were actually better than the sales recorded for July, although four per cent below the number sold in the same month last year — 1,241 vs. 1,290.
Still, year-to-date sales at the end of August were up two per cent from the same period in 2011.
“We are bucking a national trend which points to moderating local real estate markets,” said Shirley Pryzbyl, the president of WinnipegREALTORS®.
Last July, Federal Finance Minister Jim Flaherty announced that the maximum amortization period allowed for mortgages was to be dropped to 25 years from the previous 30 years.
Both CREA and the Conference Board said the new regulations are primarily affecting first-time home buyers, who are now finding it difficult to qualify for a mortgage under the new rules.
According to the Conference Board, new listings eased between July and August in 17 cities and were also behind their previous year’s volume in 17 markets. Falling listings are another sign of weakness, because homeowners are less likely to list when the market is soft.
A declining sales-to-listings ratio in 21 markets is another indicator of cooling, but balanced conditions were still observed in 23 areas in August. Victoria, Vancouver, Québec City, and Gatineau flashed buyers’ signals last month. A big drop in listings pushed Windsor into sellers’ conditions, but this is unlikely to last, as sellers are expected to retreat in coming months.
In Winnipeg, the Conference Board reported that the local housing market has become balanced, with a sales-to-new-listing ratio of 0.727. The range for a balanced market to exist in Winnipeg is 0.422 to 0.811.
Despite the softer market, the Conference Board reported, average prices in August were down from the previous month in only nine of 28 Canadian markets and hovered above August 2011 levels in 25 areas. 
The Conference Board is predicting that house prices in Winnipeg will climb between five and 6.9 per cent over the short term. The average selling price in August for Winnipeg was $258,842, which is a rise of 4.2 per cent from July and an increase of 8.3 per cent the same month a year ago.
The Conference Board report expects Winnipeg to be one of five Canadian centres to experience a year-over-year price increase.
“If we have learned anything from what has happened in Winnipeg over the last few years,” said Pryzbyl, “it is that we have a resilient housing market that continues to perform remarkably well.”