- Canadian existing home sales increased (+11.2%) for a third consecutive month in April, while new listings fell by a further 1.8%.

- As a result, the market was considerably more balanced to kick off the second quarter.

- Average price up 1.0% from March, back above $290,000.

After falling dramatically throughout most of last year, sales of existing homes had firmed up in the first quarter of this year, increasing in both February (+10.3%) and March (+7.7%). This morning's April data release from CREA provides us with a first glimpse at the pace of resale housing market activity heading into the second quarter. The positive upward momentum in sales established in Q1 was improved upon with an 11.2% increase from the month prior - the largest monthly jump since March 2004. Although broadly based regionally, this was led by a surge in Western markets, with sales up 31% in Calgary and 30% in Vancouver. The national level of actual sales remained considerably lower (-22.1%) than a year prior, however. Meanwhile, new listings continued to trend down, falling by a modest 1.8% on the month.

As a result of considerable market softness throughout 2008, best expressed in a slumping sales-to-new listings ratio, prices had been in retreat since peaking at an average near $324,000 in December 2007. As of April, the average resale price stood 9.8% lower than that peak and 3.2% lower than a year prior. Signs that a trough in prices might be forming, however, surfaced in the first quarter, and were made clearer by the latest data from April. The average resale home price had been remarkably stable around $283,500 from December to February, and has increased in both March (+2.1%) and April (+1.0%). The next few quarters of data will be crucial in determining if a trough has indeed formed or if this was just a respite with another leg down ahead. Our baseline forecast for a peakto-trough average price decline of around 20% - half of which has already occurred - at the national level assumes the latter is more likely. Despite some surprising strength recorded in sales and prices in April, we err on the side of caution and remain unconvinced for the time being that prices have fully stabilized as a severe recession continues to play out from coast to coast. While a dramatically improved affordability picture is definitely helping to smooth out the downturn, as prices have come off their peaks and interest rates remain low, one cannot preclude further softness in sales over the next few quarters. So far, the first four months of 2009 lend credence to the view that improved affordability is winning out against the weak economic backdrop of a recession. This puts some upside risk to our dour mid-March forecast and is certainly a positive development, but we are still in the early rounds of a bout that has yet to fully play out.