Home sales in Canada were down 31 percent in February compared with a year ago, and average prices fell 9.2 percent says the Canadian Real Estate Association.

The supply of homes for sale remains high, but has been trending lower with the number of homes on the market down 10.9 per cent from February last year.

“Consumer confidence will continue to be depressed by a barrage of negative economic news in the months ahead,” said CREA Chief Economist Gregory Klump. “Heightened job insecurity will keep many potential homebuyers on the sidelines. Those who are confident about their job situation will benefit from improving affordability in a number of housing markets.”

With falling interest rates (The Bank of Canada lowered its headline interest rate to a record low 0.50 percent at the beginning of March) and falling house prices, the affordability of houses in Canada has improved sharply over the past few months. The Bank said, “the effects of the recent aggressive monetary and fiscal policy actions in Canada and other major economies will begin to be felt in the second half of this year and will build through 2010. Once the global financial system stabilizes and global growth recovers, the underlying strength of the Canadian economy and financial sector should ensure a more rapid recovery in Canada than in most other industrialized economies.”

The ongoing credit crunch has pushed Canada’s banks into reducing or completely eliminating discounts on advertised mortgage interest rates.

“Sales activity and prices will decline this year, as many buyers hunker down and put off buying decisions during the economic recession,” said Klump.

16 Mar 2009