The malaise that has hung over the Canadian housing market since the beginning of the year lingered in August, with the last full month of summer ending the selling season on a low note.
Sales activity was sluggish compared to the same month last year, indicating the first two interest rate cuts by the Bank of Canada, in June and July, have had no real effect.
“Despite some fledgling signs of life to kick off the long-awaited monetary policy easing cycle, Canadian housing market activity still looks to be stuck in the same holding pattern,” says Canadian Real Estate Association senior economist Shaun Cathcart.
National home sales increased in June following the central bank’s first interest rate cut since 2020, and activity posted another small gain in August, on the heels of the second rate cut, reaching their highest level since January and their second highest in more than a year. However, sales activity still came in 2.1 per cent below August 2023.
Approximately 177,450 properties were listed for sale on all Canadian MLS systems at the end of August, an increase of 18.8 per cent from a year earlier. The number of newly listed properties ticked up 1.1 per cent month-over month. For the second month in a row, the national increase was led by a much-needed boost in new supply in Calgary. New listings were also up in Edmonton, offsetting a decline in the Greater Toronto Area. Active listings remained elevated in the country’s most populous city, with 22,653 homes on the market — a 51 per cent increase above the 10-year monthly average.
Sales rose slightly more than new listings in August, pushing the national sales-to-new listings ratio to 53 per cent. This reflects little change from July, when the ratio was 52.9 per cent. The measure has barely moved from its current level since April. The long-term average for the national sales-to-new listings ratio stands at 55 per cent, with a ratio between 45 and 65 per cent typically indicating balanced market conditions.
Buyers were in the driver’s seat in areas of the country where inventory levels were high, resulting in price declines. When balanced against regions like Calgary that experienced price growth, the national level has remained basically flat since the beginning of 2024.
The actual (not seasonally adjusted) national average home price was $649,100 in August, up just 0.1 per cent from the same month last year.
Heading into fall, it’s expected more interest rate cuts are on the way, especially given inflation finally hit the Bank of Canada’s two per cent target in August. On Sept. 4, the central bank reduced its benchmark rate another 25 basis points — the third reduction in a matter of months. Combined with less competition and easing prices in most Canadian markets, the stage is set for a faster return of demand. However, Cathcart cautions against over-optimism.
“With ever more friendly interest rates now all but guaranteed later this year and into 2025, it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well-behaved in most of the country.”