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Economic News

Canada: Homebuyers Return to the Market as the Bank of Canada Begins Rate Cuts

July 12, 2024
Kari Norman
Economist

Highlights

  • Home sales in Canada rose in June (3.7% m/m) along with the average price (1.5%) while the benchmark price held steady. Table 1 below summarizes key data points.
  • Our tracking suggests real annualized GDP growth of around 1.5% in Q2 2024, in line with the Bank of Canada’s (BoC) projection published in April.

Implications

Existing home sales rose by 3.7% m/m (seasonally adjusted) in June and remained within the lower end of seasonal norms (graph 1). It was a somewhat surprising result given that early figures from local real estate boards suggested weakness across a few major centres. This uptick in sales may reflect a feel-good response from would-be homebuyers who had been sitting on the sidelines waiting for that first cut to interest rates. Time will tell if this marks the start of a trend.

Listings continued to increase as homeowners may have expected the uptick in demand after the first of several anticipated interest rate cuts. With the sales-to-new-listings ratio rising slightly, signalling a marginally less positive market for buyers, prices started to inch up in many locations. The national average purchase price rose 1.5% while the benchmark price held steady from May. Nevertheless, average and benchmark prices both remain down about 13% since the peak in early 2022. Nationally, inventories ticked down to 4.2 months from 4.3 in May but still remain high as compared to most periods since early pandemic lockdowns (graph 2). Overall, as buyers start to return to the market, there is some supply to absorb before price pressures truly ramp up.

But as always, location makes all the difference in housing. Sales reversed their downward trend in Ontario, Quebec and New Brunswick, as well as in the country’s hottest cities, Toronto and Vancouver. While posting a modest monthly advance in June, Alberta was strongest performing province over the first half of the year, with sales up more than 16% and prices up almost 10% as compared to the same period a year ago.

Shelter remains the largest component driving inflation, and the BoC will be keeping a close eye on whether last month’s interest rate cut will result in sustained home price increases. But we expect that it will take more meaningful rate relief before we see any significant rebound in the overall housing market. To that point, we remain of the view that the BoC will reduce its policy rate later this month.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.