The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely "stuck in a holding pattern" despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
"With ever more friendly interest rates now all but guaranteed later this year and into 2025, it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well-behaved in most of the country," said CREA senior economist Shaun Cathcart in a press release.
The association's chair James Mabey added that the first week of April, May, June and September typically see a burst of new supply that can jolt the market.
This year, the Bank of Canada also announced its third consecutive cut to its key interest rate during the first week of September, which Mabey said could help lure buyers off the sidelines.
The central bank reduced its key lending rate by a quarter-percentage point to 4.25 per cent. Economic forecasts say the central bank will likely continue cutting its key lending rate by a quarter-percentage point until July 2025, bringing it down to around 2.5 per cent by that time.
"Shelter remains the largest component driving inflation. The (Bank of Canada) will be watching closely to see whether the three recent interest rate cuts result in a significant increase in home prices, but so far prices have been well-behaved," said Desjardins economist Kari Norman in a note.
"We remain confident that the (Bank of Canada) will reduce its policy rate again in October. This should be followed by another in December and six more in 2025."
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
On Monday, the federal government announced changes to mortgage rules with the aim of helping more Canadians purchase their first home.
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As of December, the price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
While sales have yet to see a major turnaround, there are encouraging signs that a rebound could be on its way, said Mike Heddle, a broker for Royal LePage State Realty in Hamilton, Ont.
Heddle said showings in the region have been on the rise over the past couple weeks after a slowdown in that metric through August.
"Before the property's sold, we've got to generate offers. Before we generate offers, we've got to generate showings," he said.
"If there's a leading indicator in the marketplace, that might be one of them."
The number of newly listed properties was up 1.1 per cent month-over-month, led by a boost in new supply in Calgary. With new listings also up in Edmonton, the supply gains in Alberta offset a decline in the Greater Toronto Area, the CREA report said.
There were around 177,450 properties listed for sale at the end of August, up 18.8 per cent from a year earlier but more than 10 per cent below historical averages for this time of the year.
TD economist Rishi Sondhi said he believes the "thaw for housing will eventually come."
"It could be the case that potential buyers are waiting for rates to move even lower before jumping in, especially with the Bank of Canada's relatively transparent messaging that further rate cuts are on the way," Sondhi said in a note.
"We currently expect healthy Canadian home sales growth over the next several quarters starting in Q4, although price growth will likely be restrained by a tough affordability backdrop and loose supply/demand conditions in B.C. and Ontario."
Heddle described the current balance in the market as one favouring would-be buyers.
"I'm of the position that it's a great time to buy if you're in the market and you can afford and it's the right house because you can negotiate," he said.
"There's not the pressure to make a quick, irrational decision. I think some of those buyers are coming to that conclusion as well."
This report by The Canadian Press was first published Sept. 16, 2024.
