The recent slump in home sales suggests a housing correction is underway in Canada, says Capital Economics. Data for August show sales activity for existing homes slumping 5.8% on a monthly basis, while the average house price edged up 0.3% from August 2011. Assuming sales continue to trend lower over the remainder of the year, the typical lag relationship between sales and prices suggests house prices will follow suit early next year, Cap Econ says. "We still think that house prices will decline by 25% over the next year or two," the firm says.
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