Many observers believe Canada's housing market is headed for a soft landing, but expect Friday's sales numbers to raise the worry meter regardless.
The market has been cooling markedly in the wake of new mortgage restrictions last summer, and a report expected Friday from the Canadian Real Estate Association will drive that point home.
"The Canadian housing market is undeniably cooling; the only question is whether it will come in for a soft or hard landing," said senior economist Benjamin Reitzes of BMO Nesbitt Burns Inc. "We expect sales to remain weak through the rest of this year and prices to fall only modestly, putting us squarely in the soft landing camp."
Mr. Reitzes expects Friday's report to show that house sales across Canada sank 12.5 per cent in February from a year earlier, far more quickly than January's 5-per-cent dip.
Expect to see a drop in average prices of a "modest" 1 per cent, he said, while the Multiple Listing Service price index slows to growth of 2.6 per cent. That, Mr. Reitzes said, would "continue its gentle deceleration, consistent with a soft landing."
He bases his overall forecast on the several local real estate boards that have already reported February sales, which weren't pretty: Vancouver, the focus of housing market fears, posted a drop of 29.4 per cent from a year earlier, while the Toronto area struggled with a 15.4-per-cent decline.
"Calgary even succumbed to the national trend with sales down from a year ago for the first time in nearly two years," Mr. Reitzes said, adding that the expected modest decline in average prices shows support from a decline in new listings and suggests "the market is not as weak as sales figures indicate."
February's figures will be affected by the fact that 2012 was a leap year, so there was an extra selling day last year, skewing the comparison with last month.
"True, February sales were dented by the fact that 2012 was a leap year, which could have carved 4 per cent from the year-over-year tally," said Mr. Reitzes' colleague, BMO's chief economist Douglas Porter. "But there is no denying the soft underbelly for broader sales."
Some believe Finance Minister Jim Flaherty went too far with July's tighter mortgage rules, while others expect the impact to fade, as the effects of past changes eased over the course of several months. That would suggest a pickup can be expected, though whether it comes in time for the spring selling season is anyone's guess.