The prices of new homes in Canada slipped by 0.6 per cent between March and April, primarily because of discounting in Western Canada, Statistics Canada reported Wednesday.
Over all, contractors' selling prices for new homes were down 3 per cent year over year.
"This is the sharpest pace of annual home price decline since the last recession of the early 1990s," Toronto-Dominion Bank economist Millan Mulraine said in a research note.
Canadian Home Builders' Association president Gary Friend, a Surrey, B.C., home builder, said the lower prices appear to be stimulating sales.
"With the reduction of costs of production, in terms of labour and materials, we're now able to pass it along to the buyers and … it's working, because [in the Greater Vancouver area]we have seen sales up for the last three months," Mr. Friend said in an interview.
Between March and April, prices declined by 1.2 per cent in Vancouver, by 0.9 per cent in Edmonton and by 0.8 per cent in Calgary.
"In Vancouver, most builders are still reducing prices to encourage sales," Statscan said in its monthly report.
"In Alberta, although some builders reported increased material costs as a result of new fire code regulations, these increases were negated by builders lowering prices or offering free upgrades in an increasingly competitive market."
The monthly decline was greater than some economists had expected. Bank of Montreal economists had forecast a 0.2 per cent dip between March and April.
Measured against last year's overheated market, the year-over-year declines were steepest in Edmonton, at 12.5 per cent, Saskatoon, at 11.9 per cent, Vancouver, at 9 per cent, and Calgary, at 8.8 per cent.
Among those cities bucking the trend was St. John's, Nfld., where new home prices were up 17 per cent year over year.
"Major industrial projects are the main contributors to the strong local economy and are attracting an important flow of migrant workers," Statscan said.
"This rapid population growth in St. John's increased demand for housing, which in turn pushed up the prices of new homes."
In Quebec City, the 12-month growth rate was 7 per cent, and new home prices were up 3.6 per cent year over year in Montreal.
"It is a bit of an entrenched story that the correction in the Canadian housing market is continuing," Mr. Mulraine said in an interview.
"We know that new home prices were the last to start falling, but they seem to be doing so at a fairly dramatic pace," he said.
"Understandably, home builders, more often than not, tend to throw in this, throw in that, throw in that upgrade, before they start reducing prices."
Mr. Friend said the combination of lower prices and low interest rates is luring buyers back into the new homes market.
"The consumers are shopping, they are doing their homework, they are taking their time," he said.
But, after a deadly slow winter, consumer confidence is gradually returning and more Canadians are making the decision to buy, he said.