CANADA HOME SALES RISE IN MARCH

       Canadian existing home sales rose 2.4 percent in March from the previous month on gains in Vancouver and Toronto. Sales increased to 36,127 units from 35,297 in February, the CREA said in a statement. Vancouver sales rose 10.9 percent to 2,059 units, while sales in Toronto advanced 1.8 percent to 6,988 unit. The average price rose 2.5 percent to C$378,532 ($371,164) on a non-seasonally adjusted basis, according to the report. Home sales have taken a big step back since last spring but prices are holding up. The market remains relatively balanced, albeit with a distinct fade.

      However for the Ontario housing starts are flat. Ontario residential construction activity slowed in March due to declining row and apartment starts. More choice in the resale market and a high volume of units under construction restrained residential starts since the spring of 2012. Starts should move higher in subsequent months given below trend readings in March and due to rising home completions which should free up some labour to commence construction on a backlog of apartment structures,” said Ted Tsiakopoulos, CMHC’s Ontario Regional Economist. Developers are shying from taking on new projects as government actions to cool the market continue to bite.  

     Statistics Canada said building permits in the residential sector shrank 7.2% in February. That was the ninth decline in 12 months. Planned building of multifamily dwellings, including condominiums, plummeted 19.1%, the seventh drop in eight months. The building permits data provide an early indication of building activity, so "it probably points to a little bit further softening in housing starts going forward", according to Robert Kavcic, a senior economist at BMO Capital Markets. 

     The Canadian government last July  tightened mortgage insurance rules for the fourth time since 2008 to cool the housing marlet amd rein in record household debt built up as Canadians took advantage of low interest rated to buy homes. Since then, there's been a correction in existing home sales. Home-building activity tends to lag existing home sales by six to 12 months, Mr. Kavcic told. He's predicting a soft landing for the housing market, because affordability is "not too out of whack" with incomes and interest rates, especially with the Bank of Canada expected to stay on the sidelines for the foreseeable future.

      The economist also expects the Canadian economy to pick up in the second half of this year, largely driven by an improvement in the economy in the U.S., Canada's biggest trading partner. Nonetheless, housing starts for the first quater averaged 177,000 at an annual rate, down 12.5% from the prior three months. That means residential investment will fall about 13% at an annualized rate in January through March, and weigh on growth in the period. Economists expect housing starts to be on a flat to declining trend over the next two years, averaging 175,000 in 2013 and 179,000 in 2014, down from 215,000 last year.