Summer Real Estate Market Pulse Check & Fall Outlook

While there were early signs of renewed momentum in June following the Bank of Canada’s first interest rate cut since 2020, activity in Canada’s housing market took a pause in July, according to data released earlier this month by the Canadian Real Estate Association (CREA).

“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,” Shaun Cathcart, CREA’s senior economist, says in a statement.

“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.”

According to CREA, July:

• National home sales fell by 0.7 percent month-over-month
• Actual monthly activity was 4.8% higher than July 2023
• The number of new properties listed was up by 0.9 per cent over the previous month
• MLS Home Price Index was down 3.9 % year-overyear but up 0.2 % month-overmonth (benchmark $718,700).
• The actual national average sale price (667,317) fell by just 0.2 percent year-over-year

Interest in the market has increased since interest rates have been cut

Phil Soper of Royal LePage claims that the market has seen a significant increase in interest since Bank of Canada cut interest rates. 

“Our principal portal which is royallepage.ca is the busiest real estate company portal in the country. Not as busy as realtor.ca … Every week I get an update from our IT team on royallepage.ca and we’ve seen a material uptick in viewership and engagement in our planning tools.”

Soper notes an unusual trend for August, which is the increase in the number of visitors to the site. “August is typically a very slow month. Things pick up at the end of August and into September. It’s indicative of re-ignited interest.”

He says the final leading indicator is the brand’s showings system, which clients use to book property showings with their realtors: “We saw an uptick in that in July. There’s clearly more interest and I believe it’s related to three principal things.

One, variable rate mortgages are cheaper given that the bank rate has come down. Two, fixed-rate mortgages are cheaper given the state of the bond market and the slowing economy — we’ve seen a real material drop in the popular five-year fixed. The third is building demand. We had this very large influx of new Canadians in 2022 (and) 2023 — a record. That’s going to put pressure on the entire housing ecosystem.”

Soper claims that demand is growing and will be released eventually. The fall will be busy due to the increase in sales volume that will be triggered by lower borrowing costs and pent-up demands. 

He believes that renters and first-time buyers are the ones most affected by higher interest rates. “That’s a big piece of the puzzle.”

Alberta, Nova Scotia and New Brunswick are strong while Ontario struggles

Listings are up because existing homeowners see some positive indicators. Christopher Alexander, President of Re/Max Canada says that province by province, it’s a different story.

“The year started off with a bang. Lots of anticipation that the Bank of Canada was going to start a series of rate cuts in the spring. That never materialized so you had this kind of malaise and slowness for several months, and then a strong majority of economists were insisting there would be rate cuts in June, so the market almost stopped in May. Then we got the rate cut and it really did nothing, but after the second rate cut we’re seeing renewed activity,”He notes.

“Alberta has been strong. New Brunswick and Nova Scotia have been pretty strong. Ontario has really struggled with slower market conditions.”

Alexander expects a renewed urgency among buyers. 

“We’ve got a lot of inventory, so that should keep prices in check for the foreseeable future. We’re expecting more rate cuts and I think once the overnight rate gets to around four per cent, we’ll see sustained activity. All the indicators are showing we’re entering healthy territory again which is a good thing,”He says. 

‘End of the slump in most of Canada by end of this year’But deeper rate cuts are needed

Robert Hogue is the assistant chief economist at RBC Economics. He described the Canadian real-estate market as slow in general. There are obviously some variations across the country. Prices are mostly flat. Some condominium prices have been under pressure.

“We’ll need more interest rate cuts to get the market going,”He notes. “It’s a fairly slow grind this summer but it remains our view that as we get more rate cuts it’s going to translate more into lower mortgage rates, and that should get the market going a little faster.

We’re not expecting a big boom or anything like that but it will be the end of the slump in most of Canada by the end of this year.”

Hogue says the Bank of Canada’s interest rate cuts in June and July likely marked a turning point for struggling housing markets across the country, but so far the impact has been mixed. He says it will require deeper rate reductions to meaningfully lower ownership costs and stimulate demand for homebuyers more broadly.

“Supply, on the other hand, continues to grow. In some cases, such as in Toronto, it reflects the completion of many newly built units (mainly condominiums) that owners (mainly investors) are looking to offload. In other cases, it could be sellers betting lower rates will spur buyer interest and improve sale outcomes. In some, it may be a sign of homeowner distress arising from high rates,” notes Hogue.

He continues to say that the balance of supply and demand differs greatly from market to market. “Conditions in Calgary, Edmonton and, to a lesser extent, Montreal favour sellers. It’s the opposite in the Toronto area where buyers have the upper hand — albeit just barely. A tenuous equilibrium holds in Vancouver.”

Hogue points out, however, that home prices in general have been leveling off since the spring. “Calgary — Canada’s housing hotspot — remains an exception, though gains have moderated recently. We see flat price trends persisting until larger rate cuts heat up demand more materially.”

Total listings up by nearly 23%; sales-to new listings below long-term median but balanced

CREA reports that at the end July, there were 183,450 homes listed for sale in Canada. This is up 22.7% from the previous year, but still 10 percent below the historical average (more than 200,000 homes for this time of year). New listings increased by 0.9 percent month-over-month. 

The national sales-to new listings ratio fell by 0.8 percent from June to 52.7% in July. CREA notes that a long-term average national sales-to new listings ratio of 55 per cent is the norm, and a ratio between 45 and 65 per cent is generally consistent with an equilibrium in the housing market.