Canadian Home Sales Edge Up Again Following Third Interest Rate Cut
The Canadian housing market has shown resilience in 2024, despite ongoing economic uncertainties. Following the Bank of Canada’s third interest rate cut of the year, national home sales increased by 1.9% in September compared to the previous month. While this might seem like a modest gain, it’s part of a broader trend of consecutive increases following interest rate cuts, reflecting the market’s responsiveness to monetary policy adjustments.
A Closer Look at the Numbers
In September 2024, home sales across the country, as reported by Canadian MLS® Systems, hit their highest level since July 2023. This uptick was largely driven by major metropolitan areas, including:
- Greater Toronto Area and Hamilton-Burlington
- Montreal and Quebec City
- Greater Vancouver and Victoria
These regions saw significant activity, contributing to the national rise in sales. The number of newly listed properties also saw a notable increase, jumping 4.9% compared to August. The surge in new listings is encouraging for buyers, as it offers more options in a market that has faced inventory shortages in recent years. However, it also slightly shifted the balance between supply and demand, with the sales-to-new-listings ratio dipping to 51.3%.
What’s Fueling the Market?
The 2024 real estate market has been heavily influenced by the Bank of Canada’s interest rate policies. Lower borrowing costs have made homeownership more accessible for many Canadians, boosting demand. According to CREA’s Senior Economist Shaun Cathcart, the sales gains following the rate cuts demonstrate a clear pattern, although the effects have been relatively subdued compared to previous years when interest rates played a more dramatic role in housing demand.
Cathcart also warns of potential buyer hesitation. With further rate cuts expected in the near future, some buyers may hold off on making a purchase, anticipating even lower rates in early 2025. This could shift demand, postponing the expected market rebound and prolonging the current period of relative price stability.
National Home Prices and Inventory Levels
The MLS® Home Price Index (HPI) saw a small increase of 0.1% in September 2024, but prices remained down by 3.3% year-over-year. This reflects a flattening trend that has persisted throughout 2024, with prices showing little movement since the beginning of the year.
The actual national average home price reached $669,630, a 2.1% increase from the same time last year. While this represents a recovery from the lows seen in late 2023, prices are still off their peak levels, and negative year-over-year comparisons are expected to continue for the time being. However, as demand remains relatively strong and new listings continue to rise, it’s likely that price stability will persist into 2025.
Inventory levels, a key factor in the market’s overall health, stood at 4.1 months of inventory in September, down slightly from 4.2 months in August. A balanced market typically has between 45% and 65% sales-to-new-listings ratio, with the current figure of 51.3% indicating a market teetering on the edge of balance but leaning toward favoring sellers.
What Does the Future Hold?
Looking ahead, the Canadian housing market is poised for continued gradual improvement as the effects of interest rate cuts take full hold. However, potential buyers and sellers may exercise caution, especially as further rate cuts are expected in 2025. This delay in decision-making could result in a slower winter market but an explosive spring season.
For those considering buying or selling, now may be the time to act, particularly before the spring rush. The advice from real estate professionals remains consistent: consult with a REALTOR® who understands the nuances of your local market to make informed decisions.
Final Thoughts
The housing market’s response to interest rate changes highlights the delicate balance of supply and demand, as well as the impact of external economic forces. While national sales gains and increased inventory are promising signs, the coming months will reveal whether these trends solidify or shift as buyers adjust to ongoing monetary policy changes.
