Housing sales plunge to six-year low

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OTTAWA - The Canadian economy has taken a sudden turn for the worse, with the housing boom finally turning to bust as sales of existing homes plunged 14 per cent to a six-year low during October and prices fell 10 per cent from a year earlier.

+ |% b% B2 F& b! v8 Q) iThe steepest monthly drop in sales in 14 years saw them down more than 25 per cent from a year earlier, the Canadian Real Estate Association reported Friday.
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1 {) s! r) d& n" d( u. N1 LThe surprisingly weak housing report was released as North American stock markets retreated, and oil prices and the Canadian dollar fell on worse-than-expected economic news out the U.S.
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3 w5 ~$ b, e( YFont:****The energy sector was a major source of weakness for the TSX, down 3.2 per cent as the price of oil dropped to $57.04 a barrel on expectations of further weakness in demand.
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: a  K3 t/ k" i, k6 V6 @& THousing activity was down from September levels in more than three quarters of Canadian housing markets, including the five most active markets -- Toronto, Montreal, Vancouver, Calgary and Edmonton. Fewer transactions in Ontario, British Columbia and Alberta accounted for more than 90 per cent of the monthly decline in national MLS dollar value, CREA said.

The bad news overshadowed surprisingly strong economic reports on Canadian factory shipments and auto sales.
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& Q& w0 l$ j4 d"Many homebuyers across Canada battened down the hatches in October as they were concerned with dire headlines about stock market volatility and a global economic downturn," said Gregory Klump, chief economist at the Canadian Real Estate Association.
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/ N4 w1 d/ g: O! `* q* t6 O"The breadth and depth of the drop in ... activity suggests a major downshift in consumer psychology" he said, adding that has moved many people to the sidelines until the economy starts to improve.
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: z/ `, Y% \) t; }$ q. C5 SThe federal government's tightening up of the mortgage eligibility rules, aimed at avoiding a U.S.-style housing bust, likely also had an impact, he added.

"These figures on the surface would suggest the bust has begun," said BMO Capital Markets economist Douglas Porter, adding that while the sharp drop may overstate the current weakness in the Canadian housing market, Canadians should expect even further declines in sales and prices in the months and year ahead.

National sales were down 27 per cent from year-ago levels, while some of the larger cities in the country, notably Vancouver and Toronto, posted even steeper drops, he noted. Even before the report's release, North American stock markets were posting triple-digit retreats after the U.S. reported that retail sales last month fell 2.8 per cent, the steepest drop in 11 years.

0 W3 q! l% K; c; Q2 J! V0 z"The details of the report were simply dismal," said TD Securities analyst Millan Mulraine.

"The general tone of the report was very dire as it is clearly indicating that U.S. consumers may have finally thrown in the towel," Mulraine said.
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; _: X" X5 R0 [, x- N8 M6 tAs the market for 75 per cent of Canadian exports, which account for 40 per cent of Canadian GDP, the plunge in retail sales in the U.S. will weigh heavily on the Canadian economy.

"Looking ahead, with U.S. consumers continuing to navigate against the headwinds of a slowing economy, tighter lending conditions and a rapidly deteriorating labour market, there is hardly any hope that consumer spending will recover in a meaningful way any time soon," Mulraine said.