As of June, the Canadian housing market is showing signs of recovery after a tough year, sparked by a strategic interest rate cut by the Bank of Canada that led to a 3.7% increase in home sales nationwide compared to May. After months of sluggish activity, the market is regaining steam. But for industry professionals, buyers, and sellers alike, the road ahead is fraught with uncertainty and challenges.
But are the rate cuts enough? Is this the start of a rate-cutting cycle? Will things get worse before they get better? We look at the story behind the numbers and examine how economic policy, consumer sentiment and regional differences are influencing Canada's real estate market recovery.
That dampened hopes of interest rate cuts, which would attract buyers.
Since our last forecast in April, expectations for rate cuts this year have subsided as many sellers put their homes on the market in the spring, bringing an influx of properties onto the market, but buyer activity and consumer confidence remain subdued.
Gradually declining interest rates are expected to eventually bring buyers back into the market, but the spring market slowdown and increasing supply levels have led to downward revisions to sales and average home price forecasts.
That's up 26% from last June, but remains below the historical average.
In 2024, approximately 472,395 residential properties are expected to be sold, up 6.1% from 2023, with the total average home price predicted to increase 2.5% to $694,393.
Looking ahead to 2025, home sales are forecast to increase 6.2% to 501,902, buoyed by continuing lower interest rates and recovering demand. The national average home price is expected to increase 5% to $729,319.
However, in reality, there were about 180,000 properties on the market by the end of June, a 26 percent improvement from a year ago, but still below the historical average of about 200,000 sales through this month.
Inventory builds may slow, bringing market conditions closer to equilibrium
New listings increased modestly at 1.5% month-over-month, and the MLS Home Price Index (HPI) increased 0.1% from May 2024. Despite these slight increases, the HPI was down 3.4% year-over-year, and the national average sales price was down 1.6% compared to June 2023.
Supply at the end of June was up 26% year-over-year, but still below the historical average, suggesting inventory builds may be slowing. The national sales-to-new listings ratio improved to 53.9% in June from 52.8% in May, closer to the long-term average of 55%, indicating more balanced market conditions.
Housing price fluctuations
Regionally, home prices continue to fluctuate. Home prices in Calgary, Edmonton, Saskatoon, Montreal and Quebec City have all been on an upward trend since the beginning of last year, while prices in Ontario and Nova Scotia have also been rising since late last year.
However, the non-seasonally adjusted National Composite MLS HPI remains 3.4% below June 2023 levels, reflecting the rapid price growth that occurred in the spring and early summer of 2023. The national average home price in June was $696,179, down 1.6% from the same month a year ago.
Bottom line: The Canadian housing market in June 2024 is one of cautious optimism and evolving dynamics. Early signs of recovery sparked by the Bank of Canada's interest rate strategy have laid the foundation for continued reductions and expected (hopeful) growth in the coming years.
With property sales up 6.1% this year and forecast to continue growing through 2025, there's a sense of tension as buyers and sellers have higher expectations. But the story is far from over.
The future of the market will depend on overcoming challenges such as rebuilding buyer confidence and managing complex supply and demand relationships. Looking forward, the current state of Canada's housing market promises a combination of resilience, adaptability and hopeful progress.