Calgary’s resale housing market had the highest annual rate of sales growth among major centres in the country in August, according to the latest data released Monday by the Canadian Real Estate Association.

And it recorded the best price growth in Canada in an index that tracks price trends in the country’s major markets.

In August, Calgary’s MLS sales reached 2,198, a 15.3 per cent hike from a year ago. In contrast, Canadian sales activity dipped by 8.9 per cent from last year to 36,235 transactions. National sales in August were down 8.9 per cent from August 2011, which was the biggest year-over-year drop since April 2011.

New listings of 3,399 in Calgary were down 11.0 per cent from a year ago while they fell by 6.7 per cent nationally to 68,762.

In Calgary, the average MLS sale price was $400,277, up 1.5 per cent. Nationally, the average price rose by 0.3 per cent to $350,192.

The MLS Home Price Index tracks home price trends in five of Canada’s most active housing markets — Greater Vancouver, the Fraser Valley, Calgary, Greater Toronto, and Montreal. These five markets comprise about 45 per cent of all home sales activity in Canada.

Calgary led the year-over-year rise in the index at 6.51 per cent. The national aggregate was a 4.03 per cent hike.

David Madani, Canada Economist with Capital Economics, said the recent slump in home sales at the national level suggests that a housing correction is underway.

“Assuming that sales continue to trend lower over the remainder of this year, then the typical lag relationship between sales and prices indicates that house prices will eventually follow suit early next year,” he said. “We still think that house prices will decline by 25 per cent over the next year or two.

“Slumping home sales . . . suggests that the willingness of potential home buyers to pay seller’s astronomically high asking prices may be withering.”

In Alberta, MLS sales of 5,198 in August were up 5.3 per cent from last year; new listings fell by 12.5 per cent to 8,472; and the average sale price rose by 3.5 per cent to $356,488.

“While we always caution that housing market trends at the national level can and do run counter to trends in many local markets, the decline in activity in August was definitely the result of much of the country moving in the same direction,” said Wayne Moen, president of CREA, of the national scene.

“August’s sales figures will no doubt provide comfort to policy-makers, providing the first clear indication that the recent changes to mortgage regulations aimed at cooling the market are working as intended,” said Gregory Klump, chief economist at CREA. “With previous changes to mortgage regulations, demand rose between the time changes were announced and their implementation, and invariably fell in the months immediately after being implemented, before recovering to long-term levels. By contrast, recent changes to mortgage regulations were in force more quickly after being announced, so home buyers had far less time to react. As a result, demand didn’t pick up just before the changes took effect, while sales declined once they did.”

“The broadly based decline in August sales activity suggests that some buyers may no longer qualify for a mortgage now that amortization periods for high ratio mortgages have been shortened,” added Klump. “As the linchpin of the housing market, lower first-time buying activity will have downstream effects over the rest of the market. While we expect it will likely take more time for move-up buyers to sell their current home, a few more months of data are needed to gauge the broader impact of recent regulatory changes on Canada’s housing market.”

CREA also released its latest residential forecast on Monday. For Alberta, it predicts year-over-year sales to increase by 13.8 per cent this year, the highest in the country, to 61,150 transactions and by another 1.7 per cent in 2013 to 62,200. Across Canada, sales are forecast to increase by 1.9 per cent this year to 466,900 but fall by 1.9 per cent in 2013 to 457,800.

Average sale price increases in Alberta are forecast for 2.6 per cent this year ($362,600) and 2.2 per cent in 2013 ($370,600). For Canada, the increase is forecast for 0.6 per cent this year ($365,000) but a decrease of 0.1 per cent in 2013 ($364,500).

“The Canadian housing market has indeed ratcheted down its growth pace,” said Sonya Gulati, senior economist with TD Economics. “In fact, in most local markets, it has reversed course with price and sales contractions becoming more the norm. In the absence of a catalyst like an interest rate increase or external economic shock, there really is no reason to think that the housing market will rapidly unravel from the levels currently seen.

“The U.S. Federal Reserve recently announced that it would keep interest rates at ‘exceptionally low levels’ until mid-2015. This new development will enter the Bank of Canada’s decision on when it can raise interest rates in Canada. With the level of uncertainty present in the global economy, it is difficult to precisely pinpoint when Canadian interest rates will return to more normal levels. However, the longer these low levels persist in Canada, the greater the risk that home prices move further away from economic fundamentals. As a result, low interest rates could be a short-term gain for housing in Canada, but a long-term pain if the correction journey becomes more difficult and prolonged.”

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