Is Canada's housing market turning a corner?
Home sales across Canada edged slightly higher in June compared with the previous month, although the market remains subdued as buyers wait to see whether the Bank of Canada lowers rates further in the months ahead.
The Canadian Real Estate Association (CREA) said on Friday that national home sales increased by 3.7% between May and June, with activity still well below the same time last year (falling by 9.4%).
Home prices also slipped marginally, with the non-seasonally adjusted national average – $696,179 – coming in 0.4% lower than May and 1.6% below June 2023. Still, the industry’s preferred price measure, its Home Price Index, inched upwards by 0.1% in June to register its first month-over-month increase for nearly a year.
Dominion Lending Centres (DLC) chief economist Dr. Sherry Cooper said in a note that the news showed “early signs of renewed life” across the national housing market, even though activity remained muted.
New listings were up in June, with a 1.5% increase spurred by a flood of inventory hitting the Greater Toronto Area (GTA) and BC’s Lower Mainland markets. Cooper noted that the number of listed properties across the country had spiked by 26% over the same time last year, but that the figure (180,000) remains below historical averages for the month.
Canadian 🏠 sales climbed 3.7% in June 2024, with new listings seeing a 1.5% rise. Details 👉 https://t.co/ABP2i2Kfbk #CREAstats pic.twitter.com/G1SkzxMasv
— CREA | ACI (@CREA_ACI) July 12, 2024
What’s in store for the rest of 2024?
A further uptick in housing activity is likely for the second half of the year, according to Cooper, with rates seemingly on a downward trend. Bond yields “fell considerably due to the marked improvement in the June US inflation data,” she highlighted, with markets pricing in a 90% chance that the US’s Federal Reserve will cut interest rates in September.
That would ease fears of significant damage to the loonie if Canada and the US diverge on their approach to interest rates – and with monthly mortgage payments set to continue rising, discretionary consumer spending will probably slow, “providing further impetus for Bank of Canada rate cuts.”
For Royal Bank of Canada (RBC) assistant chief economist Robert Hogue, the June figures showed a modest recovery was taking place – but further rate cuts are essential to improving conditions for homebuyers and owners.
“Additional interest rate cuts are poised to stimulate homebuyer demand across the country,” he said. “But the boost will likely be incremental. We believe rates must come down materially before they make a meaningful dent in ownership costs, especially in Canada’s most expensive markets.”
That means the overall recovery will likely remain modest throughout the rest of 2024 before “accelerating somewhat” next year as interest rates continue a downward trajectory.
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