Photo: James Bombales

National sales slid for a second consecutive month in February, causing some industry watchers to worry about what the rest of 2018 has in store for the Canadian housing market. But according to two economists, things aren’t as bad as they seem.

“Despite a less-than-stellar headline, there were some modestly encouraging details in [the latest data release from the Canadian Real Estate Association],” write TD economists Michael Dolega and Rishi Sondhi, in a recent note. “While sales did drop, the pace of decline eased considerably relative to January.”

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National sales fell 6.5 per cent month-over-month in February, after plunging 14.5 per cent in January. The pair attribute the drop to a new mortgage stress test that came into effect on January 1, which caused buyers to rush into the market in December.

“While the give-back related to the pull-forward in activity experienced late last year, as buyers rushed to close deals prior to the [new mortgage test,] appears to have been largely complete in January, the softness in sales nonetheless persisted this month,” they write.

But, the pair predict that the market will begin to adjust to the new rules in the second half of the year. They point out that listings are already rising, suggesting increased seller confidence in the market.

“All in, we expect policy-related turbulence and higher rates to negatively impact sales in the near-term, before some stabilization in activity begins to take hold mid-year,” they write.

It’s a sentiment echoed by RBC economist Robert Hogue, who also observed that listings rose last month in his most recent note.

“It’s worth noting that sellers warmed up to the market,” he writes. “New listings rose in February in both Toronto and Vancouver after declining markedly in January. This could be an early sign of pick-up in buyer activity in the coming months.”

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