May proved to be another quiet month according to new stats from CREA
The Canadian housing market should be enjoying a spring boost right now, but data from May shows things remain slow.
New stats from the Canadian Real Estate Association reveal a slight decline in overall home sales compared to the previous month, while new listings showed minimal improvement. Sales through Canadian MLS Systems were down 0.6% between April and May 2024, below the average of the last 10 years.
Home prices are also largely sliding sideways with the National Composite MLS Home Price Index down 0.2% from April to May and 2.4% below May 2023’s level. The actual (not seasonally adjusted) national average home price was $699,117 in May 2024, down 4% from May 2023.
But can lower rates help put some life back into the market?
"May was another sleepy month for housing activity in Canada, although it may prove to be the last of those now that interest rates have moved lower," said Shaun Cathcart, CREA's Senior Economist. "The Bank of Canada's June 5 rate cut may have only been 25 basis points, but the psychological effect for many who have been sitting on the sidelines was no doubt huge. The question now turns to further rate cuts – specifically, how fast, and how far?"
First cut is not the deepest
However, economists are less optimistic with RBC Economics’ Robert Hogue stating that the small rate cut does not take rates off their elevated level and would not be enough for budget-constrained buyers.
Hogue thinks it will be some time before the housing market is fizzing, given expectation of cuts of a further 75 basis points before the end of 2024 and then a further 100 points of cuts in 2025.
“Several more cuts—as well as a meaningful drop in longer term rates—would be needed to unleash the large pent-up demand that has built over the past couple of years. We think more favourable conditions will emerge later this year and into 2025,” he wrote in his analysis of the housing market data, adding that supply is likely to rise in meantime.
James Mabey, Chair of CREA, remains upbeat though.
"The spring housing market usually starts before all the snow has melted, somewhere around the beginning of April, but this year I believe a lot of people were waiting for the Bank of Canada to wave the green flag," he said. "That first rate cut is expected to bring some pent-up demand back into the market, and those buyers will find there are more homes to choose from right now than at any other point in almost five years.”
