State of the Canadian Housing Market: Home Sales Are Sluggish as Buyers Wait for Promised Interest Rate Cuts

Mont-Tremblant, QC | Naz Israyelyan

Written by Breck Hapner

The Canadian Real Estate Association (CREA) has recently released Canada’s housing data for April, showing a market increasingly favorable toward buyers. Listings are up while sales are down, with buyers cautiously remaining on the sidelines.

Buyers Are Waiting for Interest Rate Cuts Before Acting

This trend mirrors what has been seen in other areas, such as Toronto, which has also experienced a fall in sales and a surge in listings. The CREA report contains a monthly housing report YouTube video in which CREA economist Shaun Cathcart notes that buyers, having witnessed last year’s market dynamics, are waiting for clear signs from the Bank of Canada (BOC) regarding interest rate cuts before re-entering the housing market.

Last year, forecasters urged buyers to act quickly, predicting imminent rate cuts, which led to a spring market surge. However, subsequent price gains were lost in the latter half of the year, making buyers wary of similar advice now.

Whether the BOC cuts rates in the coming months will depend largely on Canada’s CPI inflation data, which was released on May 21st.

Toronto, ON

Benchmark Home Price and Sales Data

In a surprising twist, the benchmark home price in April remained unchanged at $719,400. This 0% month-over-month (MoM) change is rare but has occurred three times since 2006. However, the benchmark price is still approximately 0.63% below its value at this time last year (for the detailed spreadsheet, refer to the CREA report and click on “download data” under “National Residential Statistics”). This flatness can be at least partially attributed to the slowdown in sales, which are down 1.7% from March. 

April also saw the lowest number of Canadian home sales since 2018, with 37,745 transactions – well below the 10-year average of 43,027, according to CREA. While sales are down, new listings have increased by 2.8% since March. However, the CREA does not provide month-over-year listing data, only quarterly annualized figures.

Home Listings and Market Balance

The sales-to-new-listing ratio (SNLR) for April stands at a five-year low of 53.4%, down from March’s at 55.9%. According to the BOC, an SNLR between 40% and 60% indicates a balanced market, with values below 40% favoring buyers. Clearly Canada’s housing market is trending in that direction.

So, despite the stagnant benchmark price, decreased sales, and increased listings, the question remains: Why isn’t more demand coming to the real estate market?

According to Cathcart in the CREA monthly housing report video, “There probably is a record amount of demand out there still sitting on the sidelines, which means the question is when, not if, we start to see the markets become active again.”

West Vancouver, BC | Veronica Dudarev

Will the BOC Cut Interest Rates?

Cathcart emphasized that buyers are waiting for concrete interest rate cuts from the BOC. 

“Likely, what’s going on this spring, is that the type of buyer who jumped into the market last spring . . . has probably moved into the ‘I’ll believe it when I see it’ camp this year,” he said. “What that means is the date of the highly symbolic first rate cut has become much more important, if that’s going to in fact be what a lot of people are waiting for.”

He went on to add, “The markets are now expecting fewer rate cuts this year, because in Canada we are somewhat tethered to a booming U.S. economy. The anticipated date of the first cut in Canada hasn’t really moved. It’s still mostly priced in for July 24th.”

Markets Poised for Rate Cut in June

For most of April, markets anticipated a more than 50% chance of a rate cut in June. This probability only fell below 50% on May 9th following the release of strong Canadian job numbers. The BOC hinted at this possibility in a press conference, which was further propagated by the media.

But the sales numbers show that buyers aren’t rushing to beat the anticipated cuts, having been disillusioned by last year’s forecasts.

As uncertainty continues, the key question is whether buyers will return to the market if the BOC cuts rates in July. Much remains to be seen.

In our next article, HAVEN will take a further look at the numbers: how the current Canadian housing market is reacting to prevailing economic factors influencing real estate.