Canada: Home Sales and Listings Picked Up Again in August While Prices Dipped

Existing home sales picked up last month, rising by 1.3% m/m (seasonally adjusted) in August and remained within seasonal norms (graph 1). At that point, would-be homebuyers had seen two rate cuts, spurring a few to move off the sidelines, despite the widely anticipated early September cut and more cuts expected in the months ahead.

Listings grew last month by 1.1%, just under the pace of sales, resulting in inventory dropping marginally to 4.1 months. Still, the buildup in inventory over the first half of the year means there were minimal price pressures from the uptick in sales. At the national level, average prices declined 1.1% in August from the month prior, and benchmark prices held steady. Both remain about 14% lower than the peak of the market in early 2022.

As always, location is the defining feature of the housing market. Sales rose 0.6% in Toronto while average sale prices fell 0.8%. Vancouver saw sales pull back by 3.8% and prices drop another 2%. Montreal, Quebec City, Calgary and Edmonton all reported strong growth in sales.

Shelter remains the largest component driving inflation. The BoC will be watching closely to see whether the three recent interest rate cuts result in a significant increase in home prices, but so far prices have been well-behaved. We remain confident that the BoC will reduce its policy rate again in October. This should be followed by another in December and six more in 2025. Indeed, given recent comments External link. by the Bank’s governor Tiff Macklem, the Bank may accelerate the pace of rate cuts.