Sluggish Home Sales and Listings in May
The Canadian housing market experienced another subdued month in May 2024. National home sales edged down 0.6% from April levels, coming in 5.9% below May 2023 figures. New property listings inched up a mere 0.5% month-over-month. These tepid results underscore the market’s lack of momentum leading up to the Bank of Canada’s recent interest rate cut on June 5th. The number of homes for sale across Canada stood at around 175,000 by May’s end, up 28.4% annually but below historical norms.
Home Prices Trending Sideways Nationwide
Canadian home price appreciation has largely stalled in 2024 thus far. The MLS Home Price Index dipped 0.2% from April to May and declined 2.4% year-over-year. The national average sale price of $699,117 in May marked a 4% drop compared to May 2023 levels. However, price trends vary regionally, with steady increases in markets like Calgary, Edmonton, and Saskatoon contrasting the broader national flatline. Overall inventory levels reached 4.4 months of supply nationwide in May, the highest since fall 2019 outside the COVID-19 volatility.
Market Balance Tipping Toward Buyers
With sales down and new listings up marginally in May, the national sales-to-new listings ratio eased to 52.6%, down from 53.3% in April. This measure examines the ratio of homes sold versus homes newly listed, gauging overall market balance. Readings between 45-65% indicate a balanced market poised between favoring buyers or sellers. The long-term average of 55% suggests conditions have tipped slightly in buyers’ favor as of May 2024, improving their negotiating leverage compared to previous overheated periods.
Rate Cut Revives Homebuyer Demand Expectations
Despite subdued market conditions prevailing in May, the Canadian Real Estate Association (CREA) anticipates rising activity following the Bank of Canada’s 25-basis point interest rate reduction. CREA senior economist Shaun Cathcart believes the psychological impact of lower rates should be “huge” in motivating sidelined buyers to re-enter the market. Many prospective purchasers adopted a wait-and-see stance amid the previous rate hiking cycle. The key question now centers on the frequency and magnitude of potential further rate cuts.
Spring Could See Listings Meet Pent-Up Demand
CREA Chair James Mabey suggests the spring market kickoff was delayed this year as buyers awaited central bank policy shifts. With the first rate cut now materialized, he expects pent-up homebuyer demand to be unlocked, conveniently aligning with elevated inventory levels. This dynamic could facilitate improved market balance as new listings cater to revived sales activity. Mabey recommends buyers take advantage of today’s conditions by partnering with local real estate professionals to navigate the emerging opportunities.
