Market conditions are indicating a nationwide decline in home sales leading to a moderate drop in home prices year-over-year according to a survey of Canadian real estate boards.

The National Post reported July 6th that average Vancouver housing prices rose from 16.6 to 19.1% year-over-year this June. The Real Estate Board of Greater Vancouver reported that while June's benchmark prices were up 11.8% in Vancouver from 2009, sales numbers in Vancouver were down 30% from last year's record setting numbers. This cooling trend in transactions was apparent throughout the country. Toronto Real Estate Board's senior market analyst Jason Mercer noted a softening in buyer offers, which he said has decreased pressure in average selling prices.

Benchmark housing prices in Metro Vancouver 2005-2010

In BC, the pending implementation of the HST along with the tightening of mortgage rates led to a "front loading" scenario in the buyer's market, where most of the buying likely occurred in the early part of the year. A gradual drop or flattening of prices would be a normal reaction to 2010's early peak. Regardless of the 30% decline in sales numbers from last year's record numbers, at 2,972 sales, 2010 still saw the third highest June sales numbers ever. Put in perspective, lower than last year's astonishing record of 4,259 sales.

Several factors mitigate any scenario of a severe correction. One is the recent 0.10 decrease in five-year fixed mortgage rates made by three of the big Canadian banks. Another is a 10.8% month-over-month decrease in housing permit applications as reported by Statistics Canada. As the price of building permits increase and transactions decrease, developers will slow their activity. This will limit supply, thus creating an upward pressure which will cushion against dramatic price drops.