The spring homebuying season has reached a fever pitch with a record number of "for sale" signs being placed on Canadian lawns for the month of March.

But there are indications the market has reached the peak with nowhere to go but down.

The Canadian Real Estate Association said yesterday that 97,663 properties were put on the market last month, a 25% increase from the number of new listings in March a year ago. Since the beginning of the new year, 233,402 homes have been put on the market, the best-ever first quarter for new listings.

Demand and sales are strong -- 49,256 units traded hands in March, the second-best March on record, and a 40.8% rise from a year earlier.

Yet despite the huge increase in year-over-year sales, March was the fifth straight month that the percentage increase has declined. In some markets, sales are already falling. Sales in British Columbia dropped 17.8% from a quarter earlier and Alberta sales dropped 9.7% during the same period.

Phil Soper, chief executive of Royal LePage Real Estate Services, said affordability and consumer confidence drive the market. "The former has not eroded enough to affect the market and the latter has improved considerably," he said.

Still, he concedes the spring market may be the top for real estate. "It will be the top from an industry-volume perspective. It's the last hurrah for the pent-up demand in the market," said Mr. Soper, who expects prices to continue to rise, but more slowly.

Even with the increase in the supply of homes, sales are being stoked this spring as homebuyers scramble before tougher mortgage rules, rising interest rates and the new HST in Ontario and British Columbia come into play--all by July 1.

Many in the industry concede, however, the spring market could be the last gasp before housing sales start to drop, along with prices. Few, however, are predicting a U.S.-style crash.

"If this isn't the top, we are very close to it in terms of sale activity and price," said Gregory Klump, chief economist with CREA.

Mr. Klump doesn't predict the market will reverse dramatically, but says year-over-year comparisons are going to continue to shrink for sales and prices.

Mr. Klump said prices at the high end of the market are going to start driving down because consumers in that segment are trying to beat the clock on all the changes coming.

New mortgage rules, which go into effect on April 19, will force consumers to borrow based on the five-year posted rate if they are locking in for a term less than five years. Previously, they could use the actual rate on their contract, meaning they could borrow more.

Banks have also raised long-term mortgage rates in the past two weeks, with a five-year, fixed-rate closed mortgage rising from 5.25% to 6.10%. The Bank of Canada is expected to raise its own benchmark rates shortly and that will affect consumers with floating-rate mortgages now based on a prime rate of 2.25%.

And the introduction of the harmonized sales tax on July 1 will raise costs for some services associated with buying a house, such as a real estate commission. It is coming only to British Columbia and Ontario, but Toronto and Vancouver are the most expensive real estate markets in the country and skew the national averages.

For now, the market still has some wind behind it. "Negotiations still favour sellers during the home-buying process in a number of major Canadian housing markets," said Georges Pahud, CREA's president.

"The rise in new listings means that buyers may shop around more before making an offer."

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BY THE NUMBERS

233,402

Number of listings in Canada in Q1, best quarter on record

97,663

Number of properties listed in Canada in March

49,256

Number of properties sold in Canada in March

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Source Financial Post