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The number of newly-listed homes was at the lowest level since spring 2009. About 85 per cent of all markets had fewer listings. The Greater Toronto Area led the decline, with large percentage drops also in British Columbia’s Lower Mainland, Vancouver Island and the Okanagan region, as well as parts of Ontario.

Supply restraint may have played a big part in the month’s slowdown, Robert Hogue, senior economist with RBC Economics, wrote in a note. The drop in new listings hints at two psychological effects at play, he said. Many sellers rushed to list their properties in the months before Jan. 1 and, once the new rules came in, potential sellers may have feared a significant buyer pullback and waited to list.

He expects more listings to surface once those fears subside.

The market likely over-reacted to the new mortgage rules, Hogue wrote, and while homebuyer demand will remained dampened, it won’t be to the extent implied by January’s figures.

Volatility is expected to continue in the near-term, wrote Michael Dolega, a senior economist with TD Economics, in a note.

But, Dolega said “some stabilization” should occur by the middle of the year.

“Thereafter we expect activity to remain weighed down by rising interest rates, but with markets largely in balanced territory prices should remain well supported,” he said.

The government action successfully slowed housing markets, particularly in and around Toronto, said Sherry Cooper, chief economist at Dominion Lending Centres.

“But it hasn’t really made housing affordable,” she said. “And there’s no way to make housing affordable until we see an increase in housing supply — and not just new listings, but actually new construction.”

The pace of housing starts in January held steady compared with December at about 216,200, Canada Mortgage and Housing Corp. reported earlier this month. But the pace is expected to moderate this year.

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