Morning Market Brief August 16, 2024

Canadian home sales stall in July

The Canadian Real Estate Association (CREA) reported that sales of existing homes pulled back in July. Home sales got a bump in June following the Bank of Canada’s (BoC) first rate cut, but demand scaled back in July. Already elevated prices and still tight financial conditions are weighing on real estate market activity. However, the BoC hopes lower mortgage rates might help reignite demand.

• Existing home sales in Canada dropped by 0.7% in July over the previous month, down from a 3.7% surge in June. This is the fourth month in 2024 with falling existing home sales, suggesting relative weakness in Canada’s real estate market.
• Elevated price pressures persisted. CREA reported that in July benchmark home prices rose by 0.2%, while the average price of a home in Canada rose by 0.1% to $685,603. In Canada’s largest real estate markets, Toronto and Vancouver, the average home price rose to $1.1 million and $1.3 million, respectively.
• Demand is expected to rise in the months ahead. After a second rate cut from the BoC in July, with more expected, CREA believes demand is ready to surge higher over the second half of 2024 and into 2025. The BoC’s benchmark overnight interest rate currently stands at 4.50% with its next announcement on September 4.
• Supply is of concern. The Canadian government is hoping to better balance the real estate market in terms of supply. Earlier in the week, it was reported that building permits dropped by 13.9% in June.

While Canada’s real estate market has struggled to gain traction to date in 2024, the spectre of lower mortgage rates could help lift demand. Looser financial conditions could also help improve Canadian consumer confidence in the ability to purchase a home. The real estate market is an important component of Canada’s economy, making it a key area to watch as the BoC lowers interest rates.

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