CPPIB, which manages Canada’s national pension fund, said on
Thursday its assets rose to a record C$183.3 billion ($180.12
billion) at the end of fiscal 2013, as its investment portfolio
returned 10.1 percent for the year ended March 31.

Chief Executive Mark Wiseman said CPPIB may be slightly less
active in dealmaking in the coming year because there is a lot
of capital flowing globally and prices are up, but he said the
fund will use its scale and long investment horizon to win deals
that are too big and complex for competitors.

“The reality is today there is a lot of capital, and assets
are fairly priced, and so we’re being patient,” Wiseman told
Reuters following the release of the fund manager’s fiscal 2013
results. “But that doesn’t mean that there are not opportunities
out there.”

The fund struck 87 global deals – many as part of a
consortium – in fiscal 2013, including 36 deals worth more than
C$200 million.

The year’s big deals included the purchase of a stake in
motorcycle grand prix organiser Dorna, the financing of a loan
to Formula One Group, the investment in Australian shopping
malls and an expansion of its warehouse portfolio in Brazil with
Singapore-based Global Logistic Properties.

Wiseman said he expects another interesting year in global
infrastructure and private equity.

“We’re looking at a number of opportunities on a global
basis around infrastructure – actually, I think at present we
are looking at opportunities in infrastructure on three
continents,” he said.

“On the private equity side … this is going to be a period
of time when private equity firms are selling assets, either by
IPOs or to strategic buyers, other private equity firms. But
again, we do believe we’ll find selective opportunities in this
market.”

It was the seventh year of the fund manager’s shift to an
active investment strategy. It is seeking to boost returns on
its massive portfolio by buying real estate, infrastructure and
other assets around the world, while providing both private
equity and credit to partners looking for cash.

Wiseman stressed the fund’s long-term investment horizon,
saying its stability and “patient capital” makes it an
attractive partner in a world dominated by short-term thinking.

“For us, a ‘quarter’ is 25 years, not 90 days,” Wiseman told
reporters.

Efforts to diversify the portfolio have boosted foreign
assets to 63.3 percent of the portfolio, while Canadian assets
make up 36.7 percent of the book.

The 10.1 percent 2013 investment gain was up from 6.6
percent a year earlier and its fourth straight gain after the
fund manager suffered losses in 2008 and 2009. It boosted the
10-year annualized nominal rate of return to 7.4 percent.

CPPIB invests on behalf of 18 million Canadian contributors
and beneficiaries, and still has about eight years before
benefits paid exceed contributions and investment income will be
needed to help pay pensions, in 2021.

Since 2007, CPPIB has increased staff from 154 to 906 -
including 51 employees in London and 32 in Hong Kong – and
ratcheted up its holdings in private market investments in a bid
to outpace financial market returns offered by stocks and bonds.

Wiseman said the staff count would continue to grow and
diversify in geographical expertise, but at a slower pace than
in past years.

Investment returns were led by a 16.8 percent gain in
private foreign developed-market equities, a 13.2 percent rise
in public foreign developed-market equities, a 9.2 percent gain
in real estate, and an 8.8 percent gain in infrastructure.

Weaker parts of the portfolio included investments in
Canadian public equities, which returned 4.2 percent, Canadian
private equities, which returned 3.4 percent, public
emerging-market equities, which returned 2.4 percent, and
inflation-linked bonds, which returned 3.0 percent.

Sales of existing homes climbed 0.6 percent in April from
March, but year-over-year sales were down 3.1 percent, the
Canadian Real Estate Association said on Wednesday in a report
that showed a small spring bounce in an otherwise slowing
housing sector.

CREA’s home price index rose 2.2 percent in April from a
year earlier, its smallest gain in more than two years. That
echoed the 2.0 percent April gain in the Teranet-National Bank
Composite House Price Index reported on Tuesday.

Prices, still above year-ago levels in most markets,
typically lag a slowdown in sales activity as sellers resist
pressure to lower asking prices and wait to see whether the
market is truly declining.

Canada’s housing market began slowing in the middle of 2012,
when the government tightened lending rules in a bid to prevent
consumers from taking on too much debt.

“Today’s report further underscores our argument that
tighter mortgage regulations have a transitory impact and the
expectation for stabilization in the housing market. We expect
this theme will persist over the balance of the year and into
2014,” Mazen Issa, Canada Macro Strategist at TD Securities,
said in a research note.

He said the key markets of Toronto and Vancouver look more
balanced after a period of moderation, which will help limit the
downside in prices.

The April month-on-month uptick in sales was the second
straight monthly gain. CREA said home sales improved in more
than half of all local markets in April from March, led by gains
in Toronto, Winnipeg, Calgary and Victoria.

There was some noise in the data. CREA chief economist
Gregory Klump said the Easter holiday and extra full weekend in
March lowered sales activity that month and boosted April sales.

The CREA report showed the national sales-to-new listings
ratio inched up to 50.4 percent in April from 49.7 percent in
March. It has held near the same level for the past nine months.

Nationally, there were 6.6 months of inventory at the end of
April 2013, unchanged from the end of March.

The national average price, not seasonally adjusted, for
homes sold in April was C$380,588 ($374,600), up 1.3 percent
from the same month last year.

MANUFACTURING DOWN

A separate report showed manufacturing sales fell
unexpectedly in March, reverting to a trend of lackluster
performance in line with modest economic growth.

The manufacturing sector has been too sluggish for comfort
since the 2008-09 recession and Statistics Canada data confirmed
that the lackluster trend continued in March.

However, an increase in the volume of factory sales in the
month may lift first-quarter economic growth more than expected.
First quarter GDP figures are due on May 31.

Factory sales fell 0.3 percent in March from February to
C$49.5 billion ($48.5 billion), below market estimates of a 0.6
percent gain and dragged down by lower prices for energy
products and a slump in fertilizer sales.

The setback came after sales had surged 2.8 percent in
February, the biggest gain since July 2011.

In the first quarter, manufacturing sales slipped 0.3
percent and the total value of sales remain below their
pre-recession peak.

However, much of the decline was due to lower prices and in
volume terms sales actually rose 0.2 percent. This will help
deliver the “first upside surprise to growth in a year,” said
David Tulk, a strategist at TD Securities.

TD sees first-quarter growth of between 2.2 percent and 2.5
percent, annualized, compared with the central bank’s latest
estimate of 1.5 percent growth.

“While we are bracing for a slower quarter in Q2, the wider
narrative for a slow yet sustained recovery over the second half
of the year, driven in large part by net exports, remains
intact,” Tulk said.

In what is traditionally the best season of the year for real estate agents, Toronto agent Ecko Jay says the industry is seeing far fewer buyers, a result of tighter lending rules, high prices and fear of a bubble. In Toronto alone, sales dropped 40 percent in the first quarter from a year earlier, making homeowners and investors jumpy.

“Some people want to cash in and pull out now,” said Jay, a 26-year veteran of the Toronto housing market, noting some are spooked by worst-case predictions of a 20 percent drop in prices from current levels.

“They say, ‘Before it gets low, let’s sell,’” Jay added. “And some of my clients want to sell and rent, hoping that when it goes down they will pick up something at a better price. Nobody has a crystal ball.”

But then there are Canadian policymakers, economists and market watchers who have the next best thing to a crystal ball. Their data and analysis point not to a bursting of the bubble like in the United States in 2007-08, when prices from peak to trough dropped 35 percent, but rather a gentle easing in Canadian housing prices, or perhaps just a momentary pause.

Naysayers believe Canada may be too optimistic and relying heavily on that old saw that Canada is not nearly as reckless as the United States. After all, the debt-to-income ratio of Canadians is at a record high, close to the levels experienced in the United States before its market crashed, and home ownership is at nearly 70 percent, also a record and five points more than its neighbors to the south.

But Canada does have some things going for it, most notably a move by the government to tighten mortgage lending rules four times in five years, most recently in July 2012, which has taken some buyers out of the market, dampening demand.

“If you look at the developments over the last year in Canada and compare them to the situation in the U.S. before the crisis, there is a clear difference,” said Julien Reynaud, an economist at the International Monetary Fund who follows Canada.

“It is not just a question of housing supply and demand; it is rather a difference in the system of mortgage finance.”

Canadians have more equity in their homes than Americans did, the default rate is lower, the sub-prime market is tiny, and mortgage interest is not tax-deductible, so there’s no incentive to build up debt.

Finally, mortgages are structured as recourse loans in which assets other than the house are held as collateral. That makes Canadian homeowners less likely to walk away than their American cousins.

“What makes Canadian housing different makes it stronger,” says Tom Lewandowski, who analyses Canadian banks for Edward Jones in St. Louis.

LEARNING FROM THE NEIGHBORS

Lewandowski believes Canada will not suffer a U.S.-style housing crash simply because policymakers had the benefit of watching it happen next door.

“What we experienced here in the U.S. with housing markets and regulators goes directly to the attitude and changes the minister of finance has made in Canada. A regulator who is being proactive is taking Step One in making sure the housing market doesn’t find itself in a bubble,” Lewandowski said.

Both Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have been on the march against a housing bubble for years, aware how low rates and loose lending standards in the United States ignited a boom and bust there.

The central bank has held rates low since the global financial crisis because growth remains tepid and global woes weigh on Canada’s export market, and Canadians can find a five-year mortgage rate below 3 percent.

But the government’s gradual tightening of rules for borrowers – a firm admission that the market was hotter than anyone was comfortable with – has taken some steam out of the market, and economists, like Carney, seem to believe a soft landing may be at hand.

“We’re encouraged by the fact the level of housing starts has come down to slightly below demographic demand, as we see right now, there’s still more adjustments to go,” he said in testimony to Parliament last week. “We’re encouraged by the evolution of house prices in a number of markets. We’re on the path to a balanced evolution of the household sector and we all have to continue to be vigilant.”

PATRIOTISM MASKS PROBLEMS?

Recent history shows, however, that even the top policymakers can make huge miscalculations on housing. The most notorious case might be that of Federal Reserve Chairman Alan Greenspan, who failed to see the U.S. housing catastrophe on the cards before he left in 2006.

Carney may be on to his next job in Europe before any hard downturn in the market proves him wrong. He leaves the Bank of Canada in June for a job heading the Bank of England.

The latest figures suggest Canada’s housing market is slowing rather than collapsing. National sales of existing homes were down 15 percent in March from a year earlier, but they edged up from the prior month as spring buyers breathed a little life back into the market that had been cooling all winter.

Prices, which rose 84 percent in the last 10 years, are still rising, though they were up less than 3 percent from last year in March – a slowdown welcomed by everyone but sellers. But bidding wars remain commonplace in hot markets like Toronto, where immigration and low supply fire demand.

Interest rates are stuck at historic lows, so affordability is actually improving as the market cools, though it still takes about 42 percent of pre-tax income to cover the typical costs of owning a detached home. Canadians have $1.65 in debt for every dollar they earn, a ratio that makes policymakers shudder.

The notorious debt-to-income ratio, at a record high, has been cited time and again by Finance Minister Flaherty and Carney as a sign consumers have taken on too much debt.

But while many economists are reassured by the differences between the Canadian and U.S. housing markets, there are some who care more about the similarities.

Yale economist Robert Shiller, one of the few to predict the U.S. housing crash, sees the same thing happening in Canada – just in slow motion.

To Shiller, whose Case-Shiller Home Price Index is widely recognized as the best measure of U.S. house prices, the parallel between the U.S. bubble and Canada’s run-up in home prices measured by the Teranet index is obvious.

“I just plot. I plot the Vancouver Teranet index with my own San Francisco index. It looks the same. Vancouver is no tamer than San Francisco, and San Francisco is one of our bubbliest cities,” said Shiller, who looks at psychology as much as data to draw his pessimistic conclusions.

He’s an outlier. A February Reuters poll of 15 forecasters, including most of the major Canadian banks, predicted Canadian house prices will fall just 7.5 percent in the next few years. None believe the correction will result in the devastation seen in the United States five years ago.

“It’s not even this time that is different, it is that this place is different,” said David Onyett-Jeffries, an economist at Royal Bank of Canada, the nation’s largest lender.

But Shiller said the psychology and patriotism of bubbles — the idea that a national can’t spot the problems that an outsider can — are not represented by Canada’s low default rates and a system of mortgage insurance that protects banks from default.

“Patriotism needs to be researched more in economics,” said Shiller. “There are psychological and sociological factors as well. Maybe we need a sociologist here.”

(Editing by Janet Guttsman, Mary Milliken and Leslie Gevirtz)

In what is traditionally the best season of the year for
real estate agents, Toronto agent Ecko Jay says the industry is
seeing far fewer buyers, a result of tighter lending rules, high
prices and fear of a bubble. In Toronto alone, sales dropped 40
percent in the first quarter from a year earlier, making
homeowners and investors jumpy.

“Some people want to cash in and pull out now,” said Jay, a
26-year veteran of the Toronto housing market, noting some are
spooked by worst-case predictions of a 20 percent drop in prices
from current levels.

“They say, ‘Before it gets low, let’s sell,’” Jay added.
“And some of my clients want to sell and rent, hoping that when
it goes down they will pick up something at a better price.
Nobody has a crystal ball.”

But then there are Canadian policymakers, economists and
market watchers who have the next best thing to a crystal ball.
Their data and analysis point not to a bursting of the bubble
like in the United States in 2007-08, when prices from peak to
trough dropped 35 percent, but rather a gentle easing in
Canadian housing prices, or perhaps just a momentary pause.

Naysayers believe Canada may be too optimistic and relying
heavily on that old saw that Canada is not nearly as reckless as
the United States. After all, the debt-to-income ratio of
Canadians is at a record high, close to the levels experienced
in the United States before its market crashed, and home
ownership is at nearly 70 percent, also a record and five points
more than its neighbors to the south.

But Canada does have some things going for it, most notably
a move by the government to tighten mortgage lending rules four
times in five years, most recently in July 2012, which has taken
some buyers out of the market, dampening demand.

“If you look at the developments over the last year in
Canada and compare them to the situation in the U.S. before the
crisis, there is a clear difference,” said Julien Reynaud, an
economist at the International Monetary Fund who follows Canada.

“It is not just a question of housing supply and demand; it
is rather a difference in the system of mortgage finance.”

Canadians have more equity in their homes than Americans
did, the default rate is lower, the sub-prime market is tiny,
and mortgage interest is not tax-deductible, so there’s no
incentive to build up debt.

Finally, mortgages are structured as recourse loans in which
assets other than the house are held as collateral. That makes
Canadian homeowners less likely to walk away than their American
cousins.

“What makes Canadian housing different makes it stronger,”
says Tom Lewandowski, who analyses Canadian banks for Edward
Jones in St. Louis.

LEARNING FROM THE NEIGHBORS

Lewandowski believes Canada will not suffer a U.S.-style
housing crash simply because policymakers had the benefit of
watching it happen next door.

“What we experienced here in the U.S. with housing markets
and regulators goes directly to the attitude and changes the
minister of finance has made in Canada. A regulator who is being
proactive is taking Step One in making sure the housing market
doesn’t find itself in a bubble,” Lewandowski said.

Both Bank of Canada Governor Mark Carney and Finance
Minister Jim Flaherty have been on the march against a housing
bubble for years, aware how low rates and loose lending
standards in the United States ignited a boom and bust there.

The central bank has held rates low since the global
financial crisis because growth remains tepid and global woes
weigh on Canada’s export market, and Canadians can find a
five-year mortgage rate below 3 percent.

But the government’s gradual tightening of rules for
borrowers – a firm admission that the market was hotter than
anyone was comfortable with – has taken some steam out of the
market, and economists, like Carney, seem to believe a soft
landing may be at hand.

“We’re encouraged by the fact the level of housing starts
has come down to slightly below demographic demand, as we see
right now, there’s still more adjustments to go,” he said in
testimony to Parliament last week. “We’re encouraged by the
evolution of house prices in a number of markets. We’re on the
path to a balanced evolution of the household sector and we all
have to continue to be vigilant.”

PATRIOTISM MASKS PROBLEMS?

Recent history shows, however, that even the top
policymakers can make huge miscalculations on housing. The most
notorious case might be that of Federal Reserve Chairman Alan
Greenspan, who failed to see the U.S. housing catastrophe on the
cards before he left in 2006.

Carney may be on to his next job in Europe before any hard
downturn in the market proves him wrong. He leaves the Bank of
Canada in June for a job heading the Bank of England.

The latest figures suggest Canada’s housing market is
slowing rather than collapsing. National sales of existing homes
were down 15 percent in March from a year earlier, but they
edged up from the prior month as spring buyers breathed a little
life back into the market that had been cooling all winter.

Prices, which rose 84 percent in the last 10 years, are
still rising, though they were up less than 3 percent from last
year in March – a slowdown welcomed by everyone but sellers. But
bidding wars remain commonplace in hot markets like Toronto,
where immigration and low supply fire demand.

Interest rates are stuck at historic lows, so affordability
is actually improving as the market cools, though it still takes
about 42 percent of pre-tax income to cover the typical costs of
owning a detached home. Canadians have $1.65 in debt for every
dollar they earn, a ratio that makes policymakers shudder.

The notorious debt-to-income ratio, at a record high, has
been cited time and again by Finance Minister Flaherty and
Carney as a sign consumers have taken on too much debt.

But while many economists are reassured by the differences
between the Canadian and U.S. housing markets, there are some
who care more about the similarities.

Yale economist Robert Shiller, one of the few to predict the
U.S. housing crash, sees the same thing happening in Canada -
just in slow motion.

To Shiller, whose Case-Shiller Home Price Index is widely
recognized as the best measure of U.S. house prices, the
parallel between the U.S. bubble and Canada’s run-up in home
prices measured by the Teranet index is obvious.

“I just plot. I plot the Vancouver Teranet index with my own
San Francisco index. It looks the same. Vancouver is no tamer
than San Francisco, and San Francisco is one of our bubbliest
cities,” said Shiller, who looks at psychology as much as data
to draw his pessimistic conclusions.

He’s an outlier. A February Reuters poll of 15 forecasters,
including most of the major Canadian banks, predicted Canadian
house prices will fall just 7.5 percent in the next few years.
None believe the correction will result in the devastation seen
in the United States five years ago.

“It’s not even this time that is different, it is that this
place is different,” said David Onyett-Jeffries, an economist at
Royal Bank of Canada, the nation’s largest lender.

But Shiller said the psychology and patriotism of bubbles –
the idea that a national can’t spot the problems that an
outsider can — are not represented by Canada’s low default
rates and a system of mortgage insurance that protects banks
from default.

“Patriotism needs to be researched more in economics,” said
Shiller. “There are psychological and sociological factors as
well. Maybe we need a sociologist here.”

(Editing by Janet Guttsman, Mary Milliken and Leslie Gevirtz)

The data fueled investor appetite for riskier assets
including stocks and helped support the prices of some
commodities. While the Canadian currency climbed in early trade,
activity fell off when the data bounce faded.

“It’s very, very light volumes, very light activity, there
are no big drivers across most of the markets, whether bonds or
currencies,” said Mark Chandler, head of Canadian fixed income
and currency strategy at Royal Bank of Canada.

“The U.S. dollar was a bit of an outlier, weaker across the
board, and the Canadian dollar garnered some strength from that
early on,” he added.

The number of Americans filing new claims for unemployment
benefits fell last week by a surprisingly large 16,000 to
339,000, offering reassurance the bottom is not falling out of
the labor market despite signs of slower growth.

The data countered several weeks of signs that the U.S.
economic activity softened in March and early April, and recent
weak global economic data, including record-high jobless figures
from Spain on Thursday.

The unexpected strength in the U.S. labor market helped send
U.S. stock markets up and government bonds down, aided by
earnings that beat lowered expectations.

The Canadian dollar ended the North American
session at C$1.0208 to the U.S. dollar, or 97.96 U.S. cents, up
from C$1.0256, or 97.50 U.S. cents, at Wednesday’s close.

Chandler said he did not see much that might drive trading
in the Canadian dollar on Friday, with the only major data being
U.S. GDP for the first quarter. He expects the Canadian dollar
to weaken in the weeks and months ahead, with few signs of the
Canadian economic strength that buoyed it during parts of last
year.

“We continue to look for the Canadian dollar to weaken
somewhat, get to C$1.05 by the late summer period,” he said.

Canadian markets are waiting for the Bank of Canada to
announce a replacement for Governor Mark Carney, who is leaving
in June to head the Bank of England. The bank’s current deputy,
Tiff Macklem, is widely expected to take the helm, but analysts
say there is always a chance of a surprise.

The loonie, as the currency is colloquially known, has
traded within a tight range since the central bank last week
stuck to its oft-repeated view that its next interest rate move
will be a rise.

Canadian government bond prices were mixed. The two-year
bond was down half a Canadian cent to yield 0.947
percent and the benchmark 10-year bond was down 20
Canadian cents to yield 1.747 percent.

“We traded all the way down to C$1.0201, so it’s been a very
strong morning, a lot just based on U.S. dollar broad-based
weakness,” said Camilla Sutton, chief currency strategist at
Scotiabank.

“All in all it’s a broadly weaker U.S. dollar day, we don’t
have a lot of data from Canada.”

The number of Americans filing new claims for unemployment
benefits fell last week by a surprisingly large 16,000 to
339,000, offering reassurance the bottom is not falling out of
the labor market despite signs of slower growth.

The unexpected strength boosted risk-on sentiment, sending
U.S. stock markets to a positive open. While the U.S. dollar
pared some losses, it was weaker against most currencies as
investors worried about a recent disappointing run of economic
news from the United States, Germany and China.

At 9:42 a.m. (1342 GMT) the Canadian dollar was
trading at C$1.0209 to the U.S. dollar, or 97.95 U.S. cents, up
from C$1.0256, or 97.50 U.S. cents, at Wednesday’s North
American close.

Sutton said testimony by Bank of Canada Governor Mark Carney
on Wednesday was in line with previous statements and the recent
Monetary Policy Report, confirming a tightening bias.

The Bank of Canada is expected to announce a replacement any
day for Carney, who is leaving in June to head the Bank of
England. The bank’s current deputy, Tiff Macklem, is widely
expected to take the helm, but analysts say there is always a
chance of a surprise.

The loonie, as the currency is colloquially known, has
finished within a tight 12-point range since the central bank
stuck to its oft-repeated view last week that its next interest
rate move will be a rise.

Canadian government bond prices were mixed. The two-year
bond was down 1 Canadian cent to yield 0.950 percent
and the benchmark 10-year bond was down 14 Canadian
cents to yield 1.740 percent.

The index, which measures price changes for repeat sales of
single-family homes, showed overall prices rose 0.4 percent in
March from a month earlier.

The index was up 2.6 percent from a year earlier, the
smallest 12-month gain since November 2009. The annual rate has
been slowing for more than a year.

The report suggested Canada’s housing market regained some
strength in March after a long slow winter of decline following
the government’s move to tighten mortgage lending rules in July
2012.

Residential real estate activity typically picks up in the
spring, and economists have been waiting to see if demand will
return after a dramatic slowdown since the middle of 2012.

The report echoed one released on Monday by the Canadian
Real Estate Association (CREA) that showed sales of existing
homes bounced up 2.4 percent in March from February, though
year-over-year sales are sharply lower.

The Teranet data showed prices rose in March from February
in nine of the 11 metropolitan markets surveyed, led by a 1.3
percent gain in Calgary and a 1.0 percent rise in Edmonton.
Prices were also up 0.8 percent in Vancouver, 0.7 percent in
Montreal, 0.4 percent in Quebec City, 0.3 percent in Halifax and
Winnipeg, 0.2 percent in Toronto and 0.1 percent in Ottawa.

They were down 3.2 percent in Victoria — the largest
monthly decline in almost 23 years over which the
Teranet-National bank index has been calculated for that city –
and 0.9 percent down in Hamilton.

Year-on-year prices dropped in two cities — Victoria, where
they were down 3.5 percent from March 2012, and Vancouver, where
prices fell 1.5 percent. British Columbia had the hottest
housing market going into the downturn.

Compared with March 2012, prices were 5.9 percent higher in
Quebec City, 5.7 percent higher in Calgary, 4.9 percent higher
in Hamilton, 4.7 percent higher in Toronto, 4.5 percent higher
in Winnipeg and Halifax, 3.7 percent higher in Edmonton, 2.3
percent higher in Ottawa, and 1.5 percent higher in Montreal.

Prices were up 2.2 percent from a year earlier, the smallest
increase in more than two years, the report from the Canadian
Real Estate Association (CREA), the umbrella group for real
estate agents, said.

Sales were up 2.4 percent in March from the month before.
Actual sales for March, not seasonally adjusted, were down 15.3
percent from a year earlier, the report said.

The March month-on-month uptick in sales, after a 1.1
percent drop in February, and the modest rise in prices raised
hopes Canada’s housing market may be on track for a soft landing
rather than a U.S.-style crash.

The market was sizzling a year ago, but has cooled sharply
since the federal government tightened mortgage rules in July
2012 to prevent a U.S.-style real estate bubble. The changes
shortened the maximum mortgage length, making it harder for
Canadians to take on too much debt to get into the expensive
real estate market.

It was the Conservative government’s fourth such move in
four years as it grew alarmed by record high household debt
levels.

“Today’s print helps to placate some of the concern that the
housing market is in for a crash following an appreciable
slowdown in sales and construction activity since the
implementation of the fourth round of tighter mortgage
regulations last summer,” Mazen Issa, Canada macro strategist at
TD Securities, said in a research note.

“We expect the theme of stabilization to take hold over the
coming months to reflect shifting fundamentals.”

CREA said there was some noise in the data, including the
Easter holiday, which may have held sales back.

“National sales have been holding fairly stable since last
summer,” CREA President Laura Leyser said in a statement.

“We’ll be watching closely as the spring market picks up to
see whether the March sales increase marks the beginning of
an improving trend.”

The CREA report showed the national sales-to-new listings
ratio was little changed at 49.9 per cent in March from 50.3 per
cent in February. This measure has held fairly steady around
this level for the past eight months, CREA said.

Nationally, there were 6.5 months of inventory at the end of
March 2013. This was down from 6.7 months reported at the end of
February, resulting from the increase in sales combined with a
third consecutive decline in the overall supply of homes for
sale, the report showed.

The national average price, not seasonally adjusted, for
homes sold in March 2013 was C$378,532 ($373,500), up 2.5
percent from the same month last year.

The 50-year-old was laid off last year from his job of 22 years at a bus-assembly plant northwest of Toronto, and has since applied for 130 jobs. His best offer: A job at $12 an hour, half his previous wage and not enough to pay his bills.

“Really there is a recession right now. They don’t call it a recession, but the companies are closing, there are a lot of layoffs. How can this be a miracle economy?” he asked.

It wasn’t supposed to be like this. Canada’s recovery from a mild 2008-09 recession was quick and job-filled, and the country added nearly 900,000 jobs to take the jobless rate to 7.2 percent from 8.7 percent at the depths of the downturn.

No bank needed a government bailout, the housing market did not collapse and Finance Minister Jim Flaherty repeatedly boasted about how Canada was outperforming its partners in the Group of Seven rich industrialized economies.

But recent growth has consistently fallen short of expectations and a very rough patch late last year turned disappointment into dread. Economists had been betting on a quicker U.S. recovery to boost Canadian exports, as well as a pickup in business spending.

The slowdown could spell trouble for the Conservative government of Prime Minister Stephen Harper, which is showing signs of mid-term stress and losing ground in opinion polls to the third largest party, the Liberals.

Policy makers predict a brighter second half of 2013, but people like Claros and business leaders are not so sure.

“I don’t see any solution for the problem of people who are laid off right now,” said Claros, a single father of four, who is living off his severance pay and is waiting for the 31 weeks of unemployment insurance he is eligible for.

Some 54,000 Canadians joined Claros in the ranks of the unemployed in March, the worst monthly job losses in more than four years.

Previous engines of growth – housing and consumer spending – are slowing, and businesses are shying away from investments.

And with the government striving to balance its budget and the Bank of Canada talking of rate hikes rather than cuts, official stimulus programs are off the table, at least for now, leaving resource-rich Canada hitching its economic star to uncertain hopes of a strong energy sector and a U.S. recovery.

Harper wants Canadians to look at the bigger picture and not draw gloomy conclusions from the latest data.

“We can expect we’re going to have good months and bad months in terms of numbers. The trendlines remain generally positive,” he told reporters in Calgary on Thursday.

Still, Canadian growth is set to weaken for the fourth straight year in 2013 and trail the U.S. performance for a second year. But at a forecast 1.6 percent, it will likely surpass the euro zone countries and Japan by a wide margin.

LOWERING EXPECTATIONS

The labor market is far healthier than that of the United States, but job growth has lagged population growth, making the recovery incomplete. There are 1.4 million unemployed Canadians competing for jobs compared to 1.1 million prior to the crisis.

Alysa Golden, an unemployed social worker with 20 years of experience, said the last online job posting that fit her skills had 1,600 views in the first 24 hours it was posted. The 49-year-old is starting to lower her expectations in terms of salary and interest.

“With two kids, we really need something steady coming in, sooner rather than later.”

Wage growth has been decent at 2 percent a year, but experts say nervous consumers won’t spend enough to provide a significant boost to the economy, especially as households have a record C$1.65 of debt for every dollar earned.

“I do see things continuing on much as they have, where there will be economic growth, there will be some jobs created, but it won’t be enough to significantly reduce unemployment or improve the labor market,” said Erin Weir, economist for the United Steelworkers union.

As for housing, most are pleased to see an end to the overheated prices of a year ago. But a slowing housing market is dampening growth and raising fears of a U.S.-style crash.

Dustin Kroft, owner of Rent-a-Son moving company in Toronto, said he has “that sort of pit in your stomach” feeling after seeing an estimated 17 percent fall in sales in March. “It has been a while since I felt that,” he said.

The latest figures suggest the housing sector is cooling, not crashing, after the government tightened mortgage rules in mid-2012 to prevent a real estate bubble.

WAR FUNDS

Business investment remains slow and outgoing Bank of Canada Governor Mark Carney wants the private sector to unleash some of what he has called the “dead money” to stimulate the economy.

But companies need to put cash in a “war fund” until better times, said Betty Lou Pacey, founder and chief executive officer of BL Innovative Lighting, a small Vancouver-based business that exports optical fiber for lighting.

She cites the massive U.S. fiscal deficit as the biggest external threat for exporters, whose sales growth depends on healthy U.S. demand. Her own company has a couple of costly projects “percolating” that would be easier to commit to if circumstances were better.

“You’re not going to go hog wild and spend all your money. It would be foolish for a business to do that.”

And despite the more bullish mood on energy prices, some oil sands producers are shifting strategy in the face of stiff competition from cheaper-to-produce U.S. domestic oil. Last month, Suncor Energy Inc scrapped plans for a multibillion-dollar Voyageur upgrading plant, saying returns would not meet previous expectations.

Canadian businesses expect to boost capital spending this year by a mere 0.8 percent, the worst rate since 2009, Statistics Canada said in a report earlier this year.

“Our country’s little engine is really not very big,” said Pacey, referring to the hard-hit manufacturing sector.

“So that little engine is vital to the life of this country and we need some alarm bells going off.”

(Additional reporting by Jeffrey Jones and Scott Haggett in Calgary; Writing by Louise Egan; Editing by Janet Guttsman, Martin Howell)