The Canadian real estate market showed further signs of sluggishness in May, with the national benchmark home price slipping to $714,300, down 0.2 per cent from April to May 2024, and 2.4 per cent year over year. Despite this, the Canadian Real Estate Association (CREA) remains optimistic, expecting the recent rate cut by the Bank of Canada to inject new life into the market.

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Bank of Canada rate cut seen revitalizing housing market after 'sleepy' May Back to video

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“May was another sleepy month for housing activity in Canada, although it may prove to be the last of those now that interest rates have moved lower,” CREA’s senior economist Shaun Cathcart said in Monday’s report. Cathcart believes the central bank’s rate cut to 4.75 per cent on June 5 will have a significant psychological impact on potential buyers.

“The question now turns to further rate cuts — specifically, how fast, and how far?” Cathcart said.

Home sales across Canadian MLS systems dipped 0.6 per cent month over month in May, maintaining a level slightly below the ten-year average. The dip occurred despite a 0.5 per cent increase in new listings, suggesting that the market remained relatively stagnant.

On a year over year basis, home sales dropped by 5.9 per cent nationwide. Greater Vancouver declined by 19.8 per cent, while Greater Toronto experienced a decrease of 22.2 per cent. In total, 18 out of the 26 regions monitored by CREA reported a decrease in sales compared to the previous year.

Robert Kavcic, a senior economist at BMO, noted the market’s response to the interest rate cut, saying, “The Bank of Canada finally cut interest rates, and the housing market response has been more listings, not sales. Hands up if that was on your bingo card.”

The number of properties listed for sale surged by 28.4 per cent compared to the previous year, reaching around 175,000 by the end of May 2024. Additionally, active residential listings in Ontario rose substantially, jumping 63.9 per cent higher than the end of May 2023. This marks the highest level of active listings for the month of May in more than five years.

According to CREA, the increase in inventory provides a more favourable market for buyers, with the sales-to-new listings ratio easing to 52.8 per cent in May, down from 53.3 per cent in April.

“With the national sales-to-new listings ratio weakening slightly in May, modest downward price pressure continues at the national level,” noted Kavcic.

In an email, the president of Right at Home Realty, John Lusink, said he is not expecting these trends to take a sudden turn anytime soon — at least not until consumer confidence is restored to the market, which might require a few more rate cuts from the Bank of Canada.

In a separate release on Monday, the Canada Mortgage and Housing Corporation (CMHC) announced that housing starts surged to 264,500 annualized units in May, marking the highest level since September. The increase was largely driven by a 13 per cent rise in multi-unit starts, such as condos. Single-unit starts also saw a modest increase of two per cent during the same period.

Kavcic highlighted two key takeaways from CMHC’s May report.

“First, we can’t possibly double or triple the rate of construction from these levels — [I’m] going to assume that everyone sees that now. Second, there is a steady stream of completions coming down the pipeline (mostly condos) that might be meeting already-soggy resale-market conditions. That means a firmer lid on prices, and even some heat taken out of rent growth,” Kavcic said in an email to clients.

• Email: shcampbell@postmedia.com

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