Canada: The Housing Market Takes a Breather in the Dog Days of Summer

Existing home sales were little changed from last month, falling by 0.7% m/m (seasonally adjusted) in July and remained within seasonal norms (graph 1). Despite a second decrease in rates by the BoC in as many months, it seems like would-be homebuyers may be looking for more rate reductions before returning to the market en masse.

Listings continued to grow last month, and the buildup in inventory over the first half of the year held steady at just below its post-pandemic peak. The ratio of sales to new listings reversed its increase of June and is sitting near the bottom of the range seen since 2022. At the national level, average and benchmark prices held steady in July. Both remain nearly 14% lower than the peak of the market in early 2022. See our recent report “Should you Jump into the Housing Market? And If So, When? External link.” for more information on how falling interest rates could lead to higher demand and rising prices, and their opposing effects on housing affordability.

As always, location is the defining feature of the housing market. With Edmonton as the exception, sales were down across the Prairie provinces after strong gains earlier this year. Toronto saw sales fall by nearly 2% in July while prices held steady. Sales and prices fell by 2.0% and 2.4% respectively in Vancouver, giving back some of the gains made last month. In Montreal, July sales were little changed from June while prices rose 0.9%. Québec City saw sales fall 3.3% however amid continued strength in average house prices, which gained 2.2%.

Shelter remains the largest component driving inflation. The fact that the housing market is not taking off in the wake of the BoC’s two rate cuts will be reassuring in the eyes of Bank officials. Although significant pressures persist in rents, since overall inflation continues to track lower and growth is modest, we are confident that the BoC will reduce its policy rate again in September.