National home sales rise in September following summer rate cuts
September 2024 CREA update
Steadily dropping interest rates are starting to entice home buyers back into the market, with the latest national real estate data showing a strong uptick in demand.
The September numbers from the Canadian Real Estate Association reveal a total of 37,733 homes traded hands over the course of the month, marking a 6.9% year-over-year increase, and up 1.9% from August.
These numbers reflect an increase in buyer interest following the quarter-point interest rate cut delivered by the Bank of Canada on September 4th, which brought the national benchmark cost of borrowing down to 4.25% and, by extension, mortgage rates. This boost in sales has now been observed each time the central bank has cut rates – according to CREA’s Senior Economist Shaun Cathcart, small bumps in activity were recorded after the BoC’s June and July cuts, as well. However, he adds, buyers may now be holding off again in anticipation of even larger interest rates cuts to come this year and next.
Also read: Toronto home sales recovered in September as rate cuts take hold
“Sales gains are now three for three in the months following interest rate cuts, which is
a trend even though the increases weren’t headline-grabbing,” he states in CREA’s monthly release. “That said, with the pace of rate cuts now expected to be much faster than previously thought, it’s possible some buyers may choose to hold off on a purchase for now. This could further boost the rebound expected in 2025 at the expense of the last few months of this year.”
Home prices to heat up toward end of year
This increase in activity was enough to slightly heat the national average home price, which rose by 2.1% annually to $669,630, and up by 1.4% compared to August. The MLS Home Price Index – which reflects the most typical home price with the high and low extremes stripped out – also rose 0.1% on a monthly basis, but fell -3.3% from the same time period last year. However, that drop was to a smaller degree compared to the -3.9% decreases in both July and August, respectively.
“It’s likely negative year-over-year comparison will continue to shrink given the weakness in prices seen towards the end of 2023,” reads CREA’s report.
A “larger than normal” surge in sellers
Sellers also came to market in greater numbers in September, with the number of newly-listed properties rising 4.9% compared to August; “larger than normal numbers” for the first few weeks of the month. Most of Canada’s big markets saw an uptick in supply, with a total of 185,427 homes listed for sale. Compared to this time in 2023, that’s up 16.8%, but remain below the historical average of around 200,000, CREA says.
In terms of all available supply, CREA reports there are 4.1 months of inventory (the amount of time it would take to sell off all remaining homes for sale amid current market conditions). That’s down slightly from 4.2 in August, and below the long-term average of 5.1 months. According to CREA, sellers’ market conditions emerge when inventory falls below the 3.6-month mark, and a buyers’ market is present when it exceeds 6.5 months.
The Canadian housing market remains balanced
Overall, given sales rose by a smaller degree than new listings, the housing market tilted more toward buyers in September; the national sales-to-new-listings ratio (SNLR) dipped down to 51.3% from 52.8% in August. 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.
“The beginning of September saw a burst of new supply for buyers to choose from before things generally quiet down for the winter,” said James Mabey, CREA Chair. “While some buyers may choose to take advantage, others may be inclined to wait as the bulk of future rate cuts from the Bank of Canada are now expected to show up in a matter of months as opposed to years.”
CREA updates forecast based on new rate cut expectations
In fact, those anticipated central bank cuts have prompted the real estate association to adjust its forecast for the remainder of 2024 and 2025.
CREA had previously assumed there would be a “gradual return” of buyers to the market following the first BoC cuts this summer – but that hasn’t materialized as expected.
“It’s possible the type of buyer who was, until recently, entering the market with a three-year fixed rate mortgage has decided to hold off for better rates that now seem just around the corner,” states CREA’s updated forecast release.
However, the pace of how quickly the BoC will cut rates – and by how much – has also changed “dramatically” since CREA put together its summer forecast, with the central bank now expected to hit its neutral rate sometimes next spring or summer, “as opposed to the multi-year path anticipated back in July.”
“As such, the profile for sales from one of a gradual improvement has changed to one whereby the market is forecast to remain in more of a holding pattern until next spring, when a sharper rebound is expected,” CREA states. “The result is a slight downward revision to sales this year and next, but with the potential for much stronger momentum beginning in the second quarter of 2025.”
CREA now expects a total of 468,900 home sales 2024, a 5.2% increase from 2023. The national average home price is forecast to increase 0.9% year over year to $683,200 in 2024 and by 4.4% to $713,375 in 2025. Sales will then rose another 6.6% to 499,800 transactions in 2025, “as interest rates continue to decline and demand flows back off the sidelines.”
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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.