The Canadian housing market experienced a small bump in activity during August, following the Bank of Canada’s second interest rate cut in July. However, the overall picture paints a different story: a market stuck in a holding pattern. Despite the rate cuts, buyers seem hesitant to jump in, likely waiting for more significant price adjustments and greater affordability.
According to Shaun Cathcart, Senior Economist at CREA, “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 it’s been in all year.” He adds, “That said, 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.”
In August 2024, national home sales saw a modest 1.3% increase month-over-month, reaching their highest point since January and the second highest in over a year. The number of newly listed properties also saw a slight uptick of 1.1% month-over-month. However, the MLS® Home Price Index (HPI) remained unchanged from July, despite experiencing a 3.9% year-over-year decline. The actual national average sale price saw a negligible increase of 0.1% year-over-year in August.
The number of properties listed for sale on all Canadian MLS® Systems at the end of August stood at around 177,450, a significant 18.8% increase from the previous year. However, this figure remains more than 10% below the historical average of around 200,000 listings for this time of year. The sales-to-new listings ratio climbed to 53% in August, only a slight increase from the previous month. This ratio, which indicates market balance, has remained relatively stable since April and is currently hovering close to the long-term average of 55%.
While the market currently appears stuck in a holding pattern, experts expect a surge in demand as more interest rate cuts are anticipated in the coming months. James Mabey, Chair of CREA, believes that the stage is set for a faster return of demand, stating, “With more interest rate cuts now expected between now and next summer, the stage is set for a faster return of demand, but we’re clearly not there just yet.” He emphasizes that the first weeks of April, May, June, and September typically see a boost in new supply that can revitalize the market and attract buyers.
The current inventory levels stand at 4.1 months, a slight decrease from the previous month. This measure, which reflects market balance, has remained within a narrow range between 3.8 and 4.2 months since last October. The long-term average for inventory sits at approximately five months.
The National Composite MLS® HPI remained flat from July to August, following two small increases in June and July. While prices at the national level have remained relatively stable since the beginning of the year, the non-seasonally adjusted National Composite MLS® HPI was 3.9% below August 2023. This decline reflects price gains from last spring and summer followed by declines in the second half of last year. Year-over-year comparisons are likely to improve from this point onwards.
The actual national average home price stood at $649,100 in August 2024, almost unchanged from the same period in the previous year.
The Canadian housing market currently appears to be in a state of wait-and-see, as buyers and sellers alike anticipate the impact of future interest rate cuts. While the market remains stable, it’s still too early to predict whether a significant shift is on the horizon.
