Yesterday the Canadian Real Estate Association (CREA) published an article that discusses how the Canadian housing market remains in a holding pattern amid interest rate cuts.
The Canadian housing market continues to navigate a period of uncertainty despite recent monetary policy shifts. National home sales in August edged up by 1.3% from July, following the second interest rate cut by the Bank of Canada since 2020. However, the market seems to be in a “holding pattern,” as described by Shaun Cathcart, Senior Economist at the Canadian Real Estate Association (CREA).
Mixed Signals in Canadian Real Estate
While the rate cuts were expected to stimulate the market, the overall impact has been modest. The uptick in home sales was small, bringing activity to its highest level since January 2024, but still only the second-highest level in over a year. Meanwhile, prices have largely remained steady, with the MLS® Home Price Index (HPI) showing no significant month-over-month changes and a 3.9% year-over-year decline. The national average home price for August was $649,100, virtually unchanged from August 2023.
This stability, despite a more favorable interest rate environment, suggests that many prospective buyers are adopting a wait-and-see approach. As Cathcart notes, while lower rates are now expected to continue into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability.”
Inventory Trends and Regional Variations
The number of newly listed properties saw a slight increase of 1.1% in August, with significant contributions from Calgary and Edmonton. However, the Greater Toronto Area saw a decrease in new listings, reflecting regional differences in market activity. Nationally, the inventory level of 177,450 homes is 18.8% higher than a year ago, but still below the long-term average of around 200,000 properties.
James Mabey, Chair of CREA, highlighted that rate cuts typically drive demand, but their effects have not yet fully materialized. Mabey also pointed out the significance of September, historically a month of heightened real estate activity, thanks to an influx of new listings. The coming weeks will be critical in determining whether these new listings can attract buyers off the sidelines.
Market Balance and Future Expectations
In terms of market balance, the sales-to-new listings ratio remained stable at 53%, indicating that the market continues to lean towards balance. Inventory levels, with 4.1 months of supply, further emphasizing the holding pattern. The CREA’s long-term benchmark for inventory is around five months, leaving room for market growth as more buyers potentially re-enter the market.
What’s Next for Buyers and Sellers?
With more interest rate cuts anticipated by next summer, many are waiting for improved affordability before making their move. For those currently considering entering the market, it’s an opportune time to connect with a REALTOR® who can help navigate local conditions. As the fall market unfolds, with new listings and ongoing interest rate adjustments, buyers and sellers will need expert guidance to make informed decisions.
As we approach the final months of 2024, all eyes will be on how the Canadian housing market responds to these evolving conditions. The next CREA report, due in mid-October, should offer further insights into where the market is headed. The next Bank of Canada interest rate announcement is also scheduled for October 23.
To learn more about how the ever evolving market may impact your real estate goals, we invite you to reach out to our team for a free consultation.
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