Canadian real estate remained in “holding pattern” in August
August 2024 CREA update
Penelope Graham, Head of Content
August capped a quiet summer for national home sales, as would-be buyers remain on the sidelines in anticipation of deeper interest rate cuts later this year.
The latest numbers from the Canadian Real Estate Association (CREA) show a total of 39,573 homes sold over the course of the month, down -2.1% from last year. Compared to July, transactions were roughly flat, inching up 1.3%. All of this indicates the market remains in a limbo state, as buyers maintain a wait-and-see mentality, says CREA Senior Economist Shaun Cathcart.
“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 states in the association’s release.. “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.”
Buyers still holding out for rate cuts
Interest rates have been trimmed three times so far this year by the Bank of Canada, bringing the benchmark cost of borrowing down by a cumulative 75 basis points since June, to 4.25%. However, given mortgage rates remain at historical highs, that hasn’t greatly shifted affordability for buyers, nor incentivized them to re-enter the market in large numbers. However, this is expected to improve in the coming months, with another two quarter-point cuts forecasted in 2024, and potentially a full percentage decrease next year from the central bank.
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National home price stays flat
Those scant sales did little to move the national home price, which came to $649,100 in August, virtually unchanged (0.1%) from last year.
The MLS Home Price Index (HPI) – a measure of the most typical type of home sold with the high and low extremes stripped out – was also flat on a monthly basis, though dipped 3.9% year over year.
“This mostly reflects price gains last spring and summer that were followed by declines in the second half of last year,” states CREA’s report. “As such, it’s mostly likely that year-over-year comparisons will improve from this point on.” The association also points out that the index stayed the same between July and August, following two small upticks in June and July.
Balanced conditions for Canadian home buyers
In the meantime, the supply of homes for sale remains stable, if slightly lower than the long-term average. A total of 71,429 homes were brought to market in August, up 1.1% from July, and 2.1% year over year, adding to a total of 177,450 properties on the market. Compared to the same time period last year, that’s up 18.8%, though still below the historical average of 200,000 listings for this time of year.
The number of months of inventory – the calculated amount of time it would take to full sell off all available homes for sale amid current market conditions – came in at 4.1, down slightly from 4.2 in July. CREA says the measure has remained stuck in a 3.8 to 4.2-month range since last October, just below the long-term average of five months. The Albertan markets led in terms of homes coming to market, up in Calgary and Edmonton, while supply dried up in the Greater Toronto Area.
Overall, reports CREA, the national housing market can be considered to be balanced, with a sales-to-new-listings ration (SNLR) of 53%. That’s pretty much the same as the 52.9% recorded in July; in fact, CREA points out the measure has barely budged since April. The long-term average for the national sales-to-new listings ratio is 55%, with a sales-to-new listings ratio between 45% and 65% generally consistent with balanced housing market conditions.
Fall selling season: Sizzle or fizzle?
It remains to be seen if the fall market – which is typically one of the busiest selling seasons – will suffer from the same inertia, though sales are expected to pick up as the Bank of Canada passes down more interest rate cuts, says CREA Chair James Mabey.
“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 states. “There are typically four times in any given year that see a burst of new supply that can excite the market and draw buyers off the sidelines, and those are the first weeks of April, May, June, and September. So, the first week of September saw not only a third rate cut, but also a lot of new properties for buyers to consider.”
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Penelope Graham, Head of Content
Penelope has over a decade of experience covering real estate, mortgage, and personal finance topics and her commentary on the housing market is featured on both national and local media outlets.