The average price of a Canadian home sold last month was just over $491,000, a 10 per cent drop in the past year.
The Canadian Real Estate Association said Friday that the number of homes sold also plunged, by almost a quarter from the same month a year ago, which was the best March for home sales on record.
The real estate group blamed recent mortgage rule changes for wreaking havoc on the market, creating feverish demand for starter homes, but making it much harder to move up.
“Recent changes to mortgage regulations are fuelling demand for lower-priced homes while shrinking the pool of qualified buyers for higher-priced homes,” CREA’s chief economist Gregory Klump said in a release.
“Given their limited supply, the shift of demand into lower price segments is causing those sale prices to climb. As a result, ‘affordably priced’ homes are becoming less affordable while mortgage financing for higher priced homes remains out of reach of many aspiring move-up homebuyers.”
The realtor group says the average price can be a misleading indicator, because it is skewed by what’s happening in big markets such as Toronto and Vancouver. For that reason, the group said attention should focus on another number, the so-called MLS House Price Index, which adjusts for different types of homes, in different parts of the country.
By that metric, real estate values have risen by 4.6 per cent in the past year. But even that is a slowdown, as that number has now declined for 11 months in a row and is now at its lowest level in more than four years.
The HPI is calculated based on numbers from 14 major markets across the country. Most are still increasing, but five markets — Edmonton, Regina, Saskatoon, and Oakville-Milton and Greater Toronto in Ontario — are now in negative territory.
Bank of Montreal economist Robert Kavcic says the annual numbers look especially bleak because of the timing.
“Keep in mind that this time a year ago was the absolute height of the market frenzy, so the comparison is tough,” he said of the numbers.
And markets like Toronto and Vancouver, which pushed the average up before, are playing a big role in its way back down, now.
“A shifting sales mix — i.e., out of pricey Toronto and Vancouver detached homes and into cheaper condos/semis/towns — pulls down the reported average, even if the price of each individual unit doesn’t change,” Kavcic noted.
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Economist Michael Dolega with Toronto-Dominion Bank agrees that high-priced housing markets in those two cities certainly seem like they’re going to be in for a rough stretch. But he expects there will be pockets of strength across the country.
“Canadian housing markets are likely to remain under pressure from the recent [mortgage] regulation, higher mortgage rates, and in some cases provincial regulation,” Dolega said.
“However, lower-priced markets where affordability is good should generally outperform in the current environment.”