Garry Marr, Finan­cial Post

The spring home­buy­ing sea­son has reached a fever pitch with a record num­ber of “for sale” signs being placed on Cana­dian lawns for the month of March.

But there are indi­ca­tions the mar­ket has reached the peak with nowhere to go but down.

The Cana­dian Real Estate Asso­ci­a­tion said yes­ter­day that 97,663 prop­er­ties were put on the mar­ket last month, a 25% increase from the num­ber of new list­ings in March a year ago. Since the begin­ning of the new year, 233,402 homes have been put on the mar­ket, the best-ever first quar­ter for new listings.

Demand and sales are strong — 49,256 units traded hands in March, the second-best March on record, and a 40.8% rise from a year earlier.

Yet despite the huge increase in year-over-year sales, March was the fifth straight month that the per­cent­age increase has declined. In some mar­kets, sales are already falling. Sales in British Colum­bia dropped 17.8% from a quar­ter ear­lier and Alberta sales dropped 9.7% dur­ing the same period.

Phil Soper, chief exec­u­tive of Royal LeP­age Real Estate Ser­vices, said afford­abil­ity and con­sumer con­fi­dence drive the mar­ket. “The for­mer has not eroded enough to affect the mar­ket and the lat­ter has improved con­sid­er­ably,” he said.

Still, he con­cedes the spring mar­ket may be the top for real estate. “It will be the top from an industry-volume per­spec­tive. It’s the last hur­rah for the pent-up demand in the mar­ket,” said Mr. Soper, who expects prices to con­tinue to rise, but more slowly.

Even with the increase in the sup­ply of homes, sales are being stoked this spring as home­buy­ers scram­ble before tougher mort­gage rules, ris­ing inter­est rates and the new HST in Ontario and British Colum­bia come into play–all by July 1.

Many in the indus­try con­cede, how­ever, the spring mar­ket could be the last gasp before hous­ing sales start to drop, along with prices. Few, how­ever, are pre­dict­ing a U.S.-style crash.

“If this isn’t the top, we are very close to it in terms of sale activ­ity and price,” said Gre­gory Klump, chief econ­o­mist with CREA.

Mr. Klump doesn’t pre­dict the mar­ket will reverse dra­mat­i­cally, but says year-over-year com­par­isons are going to con­tinue to shrink for sales and prices.

Mr. Klump said prices at the high end of the mar­ket are going to start dri­ving down because con­sumers in that seg­ment are try­ing to beat the clock on all the changes coming.

New mort­gage rules, which go into effect on April 19, will force con­sumers to bor­row based on the five-year posted rate if they are lock­ing in for a term less than five years. Pre­vi­ously, they could use the actual rate on their con­tract, mean­ing they could bor­row more.

Banks have also raised long-term mort­gage rates in the past two weeks, with a five-year, fixed-rate closed mort­gage ris­ing from 5.25% to 6.10%. The Bank of Canada is expected to raise its own bench­mark rates shortly and that will affect con­sumers with floating-rate mort­gages now based on a prime rate of 2.25%.

And the intro­duc­tion of the har­mo­nized sales tax on July 1 will raise costs for some ser­vices asso­ci­ated with buy­ing a house, such as a real estate com­mis­sion. It is com­ing only to British Colum­bia and Ontario, but Toronto and Van­cou­ver are the most expen­sive real estate mar­kets in the coun­try and skew the national averages.

For now, the mar­ket still has some wind behind it. “Nego­ti­a­tions still favour sell­ers dur­ing the home-buying process in a num­ber of major Cana­dian hous­ing mar­kets,” said Georges Pahud, CREA’s president.

“The rise in new list­ings means that buy­ers may shop around more before mak­ing an offer.”

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