Oil rout continues to hit Western Canada's housing markets

Canadian home sales continued their descent in January, driven by cooling housing markets in Alberta and Saskatchewan.

Nationally, sales of existing homes fell 3 per cent in January compared to December and were 2 per cent lower than January of last year, according to the Canadian Real Estate Association.

The numbers fell short of analysts' expectations, which were for the country's housing market to post modest gains last month.

It was the first year-over-year decline in home sales since last April as plunging sales in Calgary and Edmonton more than offset gains in other markets. Outside of Alberta, home sales rose nearly 2 per cent compared to a year ago.

The average Canadian home price stood at $401,143 in January, up 3.1 per cent compared to the same time last year. It represents the smallest increase since April, 2013, the association said. Prices were down 1.4 per cent in Calgary, compared to last year and fell more than 12 per cent in Regina. Nearly all of the price gains were concentrated in B.C. and Ontario.

“As expected, consumer confidence in the Prairies has declined and moved a number of potential home buyers to the sidelines as a result,” said CREA president Beth Crosbie said in a statement.

Housing market analysts had predicted that longstanding trends in Canada's housing market would start to reverse this year, as plunging oil prices put a damper on hot housing markets in Western resource economies, while the Bank of Canada's decision to lower interest rates would boost home sales in other regions.

Yet, Bank of Montreal chief economist Douglas Porter points out that Canada's housing market is cooling well beyond the Western resource economies, with annual sales stagnant or falling in 15 of the country's 26 largest cities, including most major housing markets in Quebec and New Brunswick.

The amount of unsold inventory hit 6.5 months' worth of supply across the country, the highest in two years. The ratio of sales to new listings, a measure of the health of the housing market, has fallen below 50 for the first time since 2013. (CREA considers a sales to new listings ratio of between 40 and 60 to be a "balanced" market.) "While CREA still suggests that the market is balanced, there’s little doubt that the swift chill in the prior market-leading cities has cooled the broader national trends," Mr. Porter wrote.

Still, the decline has been most dramatic in Alberta and Saskatchewan. The total dollar volume of residential sales dropped 28 per cent in Alberta and 22 per cent in Saskatchewan compared to the same period last year, while rising in B.C., Ontario and the Maritimes.

In Calgary, the number of new home sales fell 35 per cent compared to January of 2013, while new listings rose 30 per cent. Edmonton and Saskatoon saw a similarly large drop in sales and rise in listings last month, while sales were up 10 per cent in Vancouver and 5 per cent in Toronto.