Housing Sales Collapsing

LORI MCLEOD Globe and Mail Update February 13, 2009 at 12:47 PM EST

Sales of existing homes fell to the lowest level since the mid-1990s last month, with activity dropping by 41 per cent in January from a year ago.

Last month 16,343 resale homes changed sales across the country, according to a report Friday from the Canadian Real Estate Association (CREA). The average price fell by 11 per cent from the year before to $273,607.

“Canadian existing home sales turned in another brutal performance in January, sliding by more than 40 per cent from year-ago levels,” Mr. Porter said in a research report.

“While another particularly harsh winter may have played a small role in the dismal sales figures, there is little doubt that Canadians are hunkering down amid widespread job losses and sagging consumer confidence,” he added.

Each of the country's 25 major markets reported a drop in sales from year-ago levels, and all but four of these experienced declines of at least 20 per cent.

In these major markets the declines were the greatest in Vancouver, down 59 per cent, followed by Calgary at 49 per cent. Sales held up best in Winnipeg, down 4 per cent from the year before. Trois-Rivières, Que., which saw the biggest year-over-year decline in prices at 15 per cent, had the second lowest drop in sales activity at 8 per cent.

Other markets that experienced large price declines last month included Victoria (-15 per cent), Saint John (-14 per cent), and Calgary (-11 per cent). Prices were up the most in Newfoundland and Labrador (+20 per cent), and Halifax-Dartmouth and Quebec (+11 per cent).

The recession is hurting consumers, and that's translating into pain for both the new and resale housing markets, Mr. Porter said.

“The deepening recession, which began in earnest among exporters, is now more forcefully dragging down the domestic side of the economy. The ongoing sharp drop in home sales points to further declines in prices as well as a deeper pullback in new home building,” he said. There are still many buyers and sellers, but deals are taking longer in many markets, CREA president Calvin Lindberg said in a statement.

Recent measures in the federal budget including an increase in allowable RRSP withdrawals for first-time home buyers and a tax credit for closing costs are expected to have a positive impact on the market later in the year, Mr. Lindberg said.

Stop dreaming Mr Lindberg, the recent measures in the federal budget will have a meaningless impact on the market. Houses are too expensive still and prices need to fall before people can afford them. In the past five years, people took out way too much debt in relation to their homes and they are now having trouble servicing that debt. They must pay it off before they step into the market again either as first time buyers or as upgraders. The pain has only begun.