Average home prices in Canada down last month, while there’s still a lookout for market shift
Canada’s real estate market remained quiet in May as sales edged lower and new listings ticked higher month over month, but the Bank of Canada’s first rate cut in four years could signal a shift in buyer and seller psychology moving forward.
The Canadian Real Estate Association’s (CREA) Monday report shows home sales activity dipped by 0.6 per cent between April and May while new listings were up 0.5 per cent. That combination of slow sales and a higher volume of new listings mean more homes are for sale across the majority of Canadian markets. Nationally, there were 175,000 properties listed for sale, a more than 28 per cent increase from a year earlier but still below historical averages , the reported added.
“May was another sleepy month for housing activity in Canada, although it may prove to be the last of those now that interest rates have moved lower,” said Shaun Cathcart, CREA’s senior economist. “The Bank of Canada’s June 5 rate cut may have only been 25 basis points, but the psychological effect for many who have been sitting on the sidelines was no doubt huge. The question now turns to further rate cuts — specifically, how fast, and how far?”
The next interest rate announcement from the Bank of Canada is in July, and economists aren’t certain if there will be another rate cut or not. If there is, it will be strong indication from the bank that the rate cut cycle will be faster than anticipated.
The average national home price also dipped slightly by 0.2 per cent from April to May, with many major markets seeing prices “sliding sideways,” the report said, except for Calgary, Edmonton and Saskatoon where prices have steadily ticked higher since the beginning of the year.
Prices are down four per cent year-over-year.
Sales fell by two per cent in Ontario month over month while prices remained flat in the province, TD economist Rishi Sondhi said in an analyst note Monday morning.
“May’s tepid performance kept the narrative of a soft spring selling season intact, as elevated borrowing costs and Bank of Canada uncertainty kept buyers on the sidelines,” he said. “Moving forward, further rate relief is likely in the cards, which should set the stage for a stronger second half of 2024.”
Toronto is still in recovery mode as sticky home prices and elevated interest rates continued to hold prospective buyers back, said Royal LePage CEO Phil Soper.
In the GTA, home prices dropped by 3.6 per cent in May year over year, according to the CREA report. However, the 2023 spring market was red hot after the Bank of Canada announced a rate hike break, Soper said, adding that May 2023 was an “aberration.”
After the June 2024 rate cut, there has been a pickup in activity in the detached home sector, Soper said.
“It’s not a spike upwards but it’s more a gentle rise,” he said. “The prolonged period of high interest rates has been hard on Canadians … it’s been a highly unusual (real estate) market so it’s reasonable to expect a gradual recovery.”
This article was first reported by The Star
