Rate cut leads to small June jump for national home sales
June 2024 CREA recap
Penelope Graham, Head of Content
Home sales picked up slightly across Canada in June, a sign that lower interest rates are starting to make a (small) mark when it comes to affordability and homebuyer demand.
The latest report from the Canadian Real Estate Association (CREA) shows transactions increased 3.7% between May and June, a result of the Bank of Canada’s quarter-point rate decrease on June 5th.
“It wasn’t a ‘blow the doors off’ month by any means, but Canada’s housing numbers did perk up a bit on a month-over-month basis in June following the first Bank of Canada rate cut,” said Shaun Cathcart, CREA’s Senior Economist. “Year-over-year comparisons don’t look great mainly because of how many buyers were still jumping into the market last spring, but that’s a story about last year. What’s happening right now is that sales were up from May to June, market conditions tightened for the first time this year, and prices nationally ticked higher for the first time in 11 months.”
Compared to the same month in 2023, sales are down -9.4%, with a total of 45,654 homes trading hands.
New home supply outweighs sales
However, sellers continue to flood the market with new listings, well offsetting sales activity. A total of 180,000 properties were listed for sale by the end of the month, up 26% on a year-over-year basis. However, CREA points out, new listings increased just 0.5% from May, which could indicate the inventory glut that’s grown across Canada may be slowing.
The supply of new homes is growing most in the Greater Toronto Area and Vancouver markets, points out CREA, which has dialed down the pressure for buyers in those cities and given them plenty of choice.
“The second half of 2024 is widely expected to see the beginnings of a slow and gradual return of buyers into the housing market,” said James Mabey, Chair of CREA. “Those buyers will face a considerably different shopping experience depending on where they are in Canada, from multiple offers in places like Calgary, to the most inventory to choose from in over a decade in places like Toronto.”
CREA reports the national sales-to-new-listings ratio (SNLR) hit 53.9%, a slight increase from 52.8% in May. This ratio provides a measure for how competitive the housing market is; a ratio between 45 - 65% generally reflects balanced supply and demand, while above and below that threshold indicates seller- and buyer-friendly conditions.
Average home price down nearly 2% from 2023
As well, soft sales and plentiful supply has done little to support price growth, with the national average home price dipping -1.6% in June to $696,179. The MLS Home Price Index, which measures the most typical type of home sold, also slid by 0.1% on a monthly basis, and down -3.4% annually. Home prices have fallen in most markets across Canada with the exception of the Prairies – Calgary, Edmonton, and Saskatoon continue to see price increases – as well as Montreal and Quebec City.
“That said, there have been some more recent upward movements in prices in other markets, including across Ontario cottage country, Mississauga, Hamilton-Burlington, Kitchener-Waterloo, Cambridge, London-St. Thomas, and Halifax- Dartmouth,” states CREA’s release.
CREA revises home sales and price forecast for 2024 and 2025
CREA has also updated its housing market forecast for the rest of 2024 and into 2025, as the Bank of Canada is expected to deliver fewer rate cuts than initially anticipated, housing supply has ramped up, and buyers remain dormant.
“While lower interest rates are still expected to gradually bring buyers back into the market going forward, a slow spring market this year along with growing levels of supply has resulted in a downward revision to the forecast for both sales and average home prices,” states CREA’s release.
The association now expects a total of 472,395 residential properties to sell in 2024, a 6.1% increase from 2023. This is a decrease from its previous forecast of 492,083 transactions and 10.5% increase.
Then, in 2025, sales will rise another 6.2% to 501,902 transactions as “interest rates continue to decline and demand continues to flow back off the sidelines.” This is down from the previously called for 7.8% increase, with 530,494 sales.
The national average home price is to increase a total of 2.5% in 2024 to $694,393, and then increase another 5% in 2025 to $729,319. Previous forecasts had called for growth of 4.9% this year to $710,120, and by 7% in 2025 to $760,120.
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A July rate cut could fuel markets faster
Canadian home buyers have stuck to the sidelines in recent months because housing remains unaffordable for many; despite the benchmark interest rate decreasing by 0.25% last month, that’s done little to ease historically steep borrowing costs. However, should another rate cut be delivered by the Bank of Canada on July 24, and anticipation builds for another in September or October, buyers may have the incentive – or feel the pressure – to enter the market.
The next Bank of Canada announcement is scheduled for July 24, 2024.
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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.