Canada’s housing market is experiencing a slowdown in homebuying activity, which is allowing for an increase in inventory, according to the Canadian Real Estate Association (CREA). In July, national home sales decreased by 0.7% compared to the previous month. CREA stated that the housing market has been stabilizing after a bustling spring, as the Bank of Canada raised interest rates in June and July. While sales have increased in certain markets like Calgary, Edmonton, and Montreal, the Greater Toronto Area and the Fraser Valley experienced downturns. CREA Senior Economist Shaun Cathcart mentioned that sales and price growth are already showing signs of further slowing due to the Bank of Canada’s recent rate hike and their messaging regarding inflation. This uncertainty in interest rates may cause some buyers to wait on the sidelines.
“Sales and price growth are already showing signs of tapering off further in August in response to the Bank of Canada’s mid-July rate hike and messaging regarding above-target inflation for longer than previously expected,” said CREA Senior Economist Shaun Cathcart. This uncertainty in interest rates may result in more buyers waiting on the sidelines until there is more certainty.
BMO Senior Economist Robert Kavcic mentioned in a note to clients that a higher-than-expected increase in July’s inflation rate indicates that the Bank of Canada’s policy rate decision on September 6 is a “live meeting,” suggesting a potential interest rate hike. Even if the central bank chooses to maintain the status quo next month, Kavcic argued that elevated inflation rates will lead to higher interest rates in the long run, offering no relief to current mortgage rates.
In July, the housing market experienced a slowdown in activity paired with a 5.6% increase in available inventory. The sales-to-new-listings ratio decreased to 59.2%, still above the long-term average of 55.2%. CREA stated that four consecutive months of inventory boosts have helped bring this metric closer to historic average levels, compared to the record lows seen in March.
CREA Chair Larry Cerqua stated that buyers now have more options in the market, which helps to regulate price growth. In July, the national average home price was $668,754, a 6.3% increase compared to the same period last year. CREA’s Home Price Index, which provides a more accurate measurement of prices, rose by 1.1% in July, about half the pace of previous months’ increases.
BMO Senior Economist Robert Kavcic mentioned that high interest rates and a potential softening in the labor market
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