The Canadian Real Estate Association says it is scaling back its housing market forecast for the remainder of the year amid increased levels of supply and a quiet spring spurred by fewer interest rate cuts expected in 2024.
The association said Friday it anticipates a gradual rebound in the national housing market, with 472,395 properties forecast to trade hands this year to mark a 6.1 per cent increase from 2023 — down from its forecast in April of a 10.5 per cent gain.
The revised forecast came as CREA reported the latest national home sales and pricing data for June.
On a year-over-year basis, the number of homes that changed hands in the month fell 9.4 per cent, reflecting stronger activity in spring 2023. But CREA said sales ticked up 3.7 per cent on a month-over-month basis.
“It wasn’t a ‘blow the doors off’ month by any means, but Canada’s housing numbers did perk up a bit on a month-over-month basis in June following the first Bank of Canada rate cut,” said CREA senior economist Shaun Cathcart in a press release.
It said the average price of a home sold last month amounted to $696,179, down 1.6 per cent from June 2023. Nationally, prices ticked up 0.1 per cent compared with May, the first month-over-month gain in 11 months.
“This could be a harbinger of improved activity ahead,” said TD economist Rishi Sondhi in a note.
“Indeed, we think that markets will be stronger in the back half of the year, as the economy holds up and more meaningful interest rate relief is delivered. However, stretched affordability conditions will likely limit the degree of improvement.”
CREA said it is now forecasting just a 2.5 per cent annual increase in the average price of a home for 2024 to $694,393. That’s down from its previous forecast of a 4.9 per cent increase.
The Bank of Canada began its rate-lowering process with a June 5 cut that brought its key interest rate down to 4.75 per cent from five per cent.
“All told, the resale housing market was subdued across much of the country in June, with little major response to the initial rate cut of this cycle,” said BMO senior economist Robert Kavcic in a note.
“For the Bank of Canada, this will be considered good news as the market is not standing in the way of further easing at this point.”
Additional potential rate cuts by the central bank later this year should bring more would-be buyers off the sidelines, said John Lusink, president of Right at Home Realty, in an interview.
“I think if they’re significant enough, we could see a bit of a surge in activity by mid-to-late Q4,” said Lusink, adding he would be “surprised if we didn’t see rate cuts throughout the remainder of the year.”
“I wouldn’t say to any buyer, ‘Wait,’ but I would say take your time, and there’s lots of inventory out there at the moment.”
There were about 180,000 properties listed for sale across Canada at the end of June, up 26 per cent from a year earlier but still below historical averages of around 200,000 for this time of the year.
New listings grew 1.5 per cent month-over-month in June, led by the Greater Toronto Area and B.C. Lower Mainland.
“You’ve got sellers sitting on one side, buyers on the other and the two aren’t meeting in the middle,” said Lusink.
“It’s sort of a holding pattern.”
This report by The Canadian Press was first published July 12, 2024.
