A slowdown in homebuying activity is giving Canada’s housing market time to build up inventory, according to the country’s real estate association.
National home sales slowed down 0.7 per cent in July from the previous month, the Canadian Real Estate Association (CREA) said Tuesday.
CREA said housing activity has been generally stabilizing from a busy spring as the Bank of Canada resumed its interest rate hiking cycle in June and July.
Sales were up last month in more than half of markets, including Calgary, Edmonton and Montreal, but downturns in the Greater Toronto Area and the Fraser Valley offset any such gains, CREA said.
“Sales and price growth are already showing signs of tapering off further in August in response to the Bank of Canada’s mid-July rate hike and messaging regarding above-target inflation for longer than previously expected,” CREA senior economist Shaun Cathcart said in a statement.
“We’re probably looking at another round of ‘back to the sidelines’ for some buyers until there’s a higher level of certainty around interest rates going forward.”
BMO senior economist Robert Kavcic said in a note to clients Tuesday morning that a bigger-than-expected jump in July’s inflation rate means the Bank of Canada’s upcoming policy rate decision on Sept. 6 is a “live meeting” — meaning a hike is in the cards.
Even if the central bank opts to stay on pause next month, Kavcic argued the inflation outlook calls for interest rates to remain elevated for longer — an environment that will not offer much, if any, relief to today’s higher mortgage rates.
July’s slowdown in activity accompanied a 5.6 per cent jump in available inventory, with the sales-to-new-listings ratio now easing to 59.2 per cent — still above the long-term average of 55.2 per cent.
But CREA said that four months in a row of boosts to available inventory has helped to lift this metric closer to historic average levels compared with the 20-year lows seen in March.
CREA chair Larry Cerqua said in a statement that buyers are finding more choice in the market, which is helping to level off price growth.
On a not-seasonally adjusted basis, the national average home price was $668,754 in July, up 6.3 per cent from a year ago.
CREA’s Home Price Index — a more like-for-like measurement of prices — climbed 1.1 per cent in July, which the association said was roughly half the increases seen in recent months.
High interest rates and a possible softening in the labour market will come up against strong demographic demand for housing in determining where home prices will head next, Kavcic said.
“We currently see the two playing to a near draw, with prices largely stagnating through the remainder of the year,” he wrote.