July home sales fizzle as buyers await more rate cuts
July 2024 CREA update
Penelope Graham, Director of Content
Home buyers stuck to the sidelines in July – and it seems more interest rate cuts will be needed to lure them off.
A total of 43,485 properties traded hands last month, according to the latest data from the Canadian Real Estate Association (CREA). That marks a 4.8% increase from last year, but was largely flat over the short term, dipping -0.7% from June.
That effectively erased some of the sales gains that were seen last month, following the Bank of Canada’s first rate cut, says the national board. However, given the amount of pent-up demand, sales are expected to pick up once borrowing costs lower further, says CREA Senior Economist Shaun Cathcart.
“With another rate cut announced on July 24, we’ve now seen two rate cuts in a row, and the expected pace of future policy easing has steepened considerably, with markets now anticipating rate cuts at every remaining Bank of Canada decision this year,” he says. “Combine that with a record amount of demand waiting in the wings, and the forecast for a rekindling of Canadian housing activity going into 2025 has just gone from a layup to a slam dunk.”
Most of Canada’s largest markets saw small changes in sales activity, reports CREA, though there were strong gains in Edmonton and Hamilton-Burlington, which helped offset slower conditions in Calgary and the Greater Toronto Area.
National home prices see little growth
With sales essentially flat, home prices followed suit; the national average fell by -0.2% year over year, to $667,317, and the MLS Home Price Index (HPI) – a measure of the most typical type of home sold – rose 0.2% on a monthly basis. While slight, that’s a bigger uptick than what was seen in June, points out CREA, making it the second – and largest – increase seen thus far in 2024.
From an annual perspective, the HPI came in -3.9% below July 2023 levels. “This mostly reflects how prices took off last April, May, June, and July – something that was not repeated over that same period in 2024. It’s mostly likely that year-over-year comparisons will improve from this point on,” states CREA’s release.
Canada’s housing market remains balanced
Those who are currently on the house hunt, however, will enjoy plenty to choose from, as new supply continues to come to market. A total of 83,607 homes were newly listed in July, up 12.7% from last year, and 0.9% over June. This was led by a “much-needed boost” in Calgary, says CREA, helping to offset sizzling sellers’ market conditions in that market.
From a national perspective, though, Canada’s housing market can be considered balanced. The sales-to-new-listings ratio – a measure of the level of competition in the market – slowed to 52.7% in July, from 53.5% in June. CREA defines a ratio between 45 - 65% as generally balanced, with below and above that threshold reflecting buyers’ and sellers’ markets, respectively.
However, the overall number of homes for sale still sits below the long-term average of five months, at 4.2 (this measures the length of time it would take to completely sell off all available homes for sale, assuming current market conditions).
Future rate cuts to drive buyer demand
But don’t expect July’s doldrums to stick around, says CREA Chair James Mabey; given the Bank of Canada is highly expected to cut its benchmark rate into the 3 - 2.5% range by 2025, today’s sales lull will be temporary.
“While it wasn’t apparent in the July housing data from across Canada, the stage is increasingly being set for the return of a more active housing market,” he says. “At this point, many markets have a healthier amount of choice for buyers than has been the case in recent years, but the days of the slower and more relaxed house hunting experience may be somewhat numbered.”
The next Bank of Canada announcement is scheduled for September 4, and is expected to usher in another quarter-point rate cut, bringing the benchmark rate to 4.25%.
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Penelope Graham, Director 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.