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Posthaste: Take heart, Canada's housing market hasn't been this stable in years Back to video

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Canadians have been watching the housing market like a hawk since the Bank of Canada began cutting interest rates, hoping for a rebound from the post-pandemic doldrums.

So far though that has failed to materialize. There was a bit of a spark after the central bank’s first rate cut in June, but in July the market “took a pause,” according to data released by the Canadian Real Estate Association last week.

Stagnant, stalled, soft have been some of the adjectives used to describe the market, but this economist has another — stable.

With home sales holding at reasonable levels, new listings rising, but not flooding the market and prices steady, “stability describes the Canadian housing market,” said Robert Kavcic, senior economist at BMO Capital Markets in a recent report.

“Considering the massive swings in prices, activity and interest rates in recent years, this is an outcome that the industry should be thrilled with.”

Home sales dipped 0.7 per cent in July, but they are still up 4.8 per cent from last year, continuing “a subdued but largely stable level of sales activity consistent with the low end of the pre-COVID range,” said Kavcic.

New listings rose modestly and are now 12.7 per cent higher than a year ago. That is slightly above the 10-year average, which is allowing inventory to build, but not saturate the market, he said.

So far the so-called “mortgage renewal cliff” has not brought a rush of distressed sellers to the market.

In fact, according to Canadian Bankers’ Association data, more than 99 per cent of mortgage holders in Canada are in good standing, a delinquency rate significantly lower than the United States and the United Kingdom.

With new listings up slightly, and sales down slightly, the sales-to-new-listings ratio sits at 52.7 per cent, firmly in balanced territory, said Kavcic — nationally at least.

The balanced market has kept price gains in check, but is that really bad news, considering Canada’s housing affordability crisis?

The MLS Home Price Index benchmark price is down 3.9 per cent in the past year, according to CREA data. But recently prices have held firm, effectively flat in the past six months, said Kavcic.

There are regional differences. Hot housing markets in Alberta and Atlantic Canada still favour sellers, but Vancouver and Montreal are mostly balanced and price performance over the past year has been better than average, he said.

Ontario real estate is softer, with buyer’s markets still scattered across the province. Toronto is pulled in two directions. A shortage of single-detached homes in this market has pushed these prices up 3.2 per cent over the past six months,  while a glut of condos have caused prices in this sector to fall by 2 per cent.

Kavcic says it is not surprising that the housing market has not yet responded to Bank of Canada interest rate cuts. With few Canadians taking variable-rate mortgages, a half-point reduction doesn’t add up to a lot of rate relief, he said.

“If we head into next spring with borrowing costs down around 4 per cent, things could get more interesting. For now, the market remains very stable,” he said.

Maybe not such a bad thing.

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Canadian housing starts took observers by surprise Friday when July came in as home construction’s best month in a year.

Robert Kavcic, senior economist for BMO Capital Markets, called the 16 per cent increase from June an “impressive show of resilience” considering the housing market.

Governments on all levels have been pushing hard to increase rental housing and this accounts for a growing portion of new construction, said Kavcic, who brings us today’s chart.

Gains were driven by multi-unit starts which spiked 21 per cent, while single-detached rose just two per cent.

“The number of units under construction (in Toronto) for homeownership has fallen by almost 20 per cent since early-2023, while that for rental purposes has risen to record highs,” he said.

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McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Today’s Posthaste was written by Pamela Heaven, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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