Home sales activity in June 2024 showed signs of renewed life following the Bank of Canada’s interest rate cut at the beginning of the month.
Existing home sales climbed 3.7% from May, according to data from the Canadian Real Estate Association (CREA). However, monthly activity remains 9.4% below June 2023 levels.
“It wasn’t a ‘blow the doors off’ month by any means, but Canada’s housing numbers did perk up a bit on a month-over-month basis in June following the first Bank of Canada rate cut,” noted Shaun Cathcart, CREA’s senior economist.
TD economist Rishi Sondhi speculates changes to the capital gains inclusion rate that came into effect in June may have also been behind some of the uptick in activity.
In its 2024 budget, the federal government announced an increase to the capital gains inclusion rate for annual gains above $250,000 for individuals. As of June 25, the new rate rises from 50% to 66.7% for sales of non-principal residences (such as vacation homes or investment properties).
This change “may have upwardly pressured supply, with investors and owners listing their properties to get ahead of the late-June implementation deadline,” Sondhi wrote. “Unfortunately, data gaps preclude a definitive statement on the matter.”
Regionally, the market saw varied performances, with significant inventory increases in areas like the Greater Toronto Area and British Columbia’s Lower Mainland. This contributed to a 1.5% month-over-month increase in new listings. Despite this, the national sales-to-new listings ratio tightened to 53.9% from 52.8% in May, suggesting a slight shift towards a balanced market.
The months of inventory measure, which indicates the number of months it would take to sell current inventories at the present rate of sales, decreased slightly to 4.2 months at the end of June from 4.3 months at the end of May. This was the first month-over-month decline in inventory levels for 2024, indicating a potential slowdown in the inventory buildup.
Overall, while year-over-year comparisons show a decrease in activity and prices, the month-over-month improvements suggest a cautious optimism as the market adjusts to recent monetary policy changes.
Home prices could pick up in the second half of the year
The national sales-to-new-listings ratio tightened to 53.9% in June from 52.8% in May, indicating a slight shift towards a balanced market.
While the national average selling price rose 1.5% month-over-month to $696,179 in June, it remains 1.6% lower compared to last year.
The MLS Home Price Index (HPI), which accounts for seasonal variations, edged up 0.1% month-over-month, marking the first monthly gain in 11 months. However, on a year-over-year basis, the HPI remains down by 3.4%, reflecting the overall softer market conditions compared to last year.
June’s monthly increase “could be a harbinger of improved activity ahead,” Sondhi noted. “Indeed, we think that markets will be stronger in the back half of the year, as the economy holds up and more meaningful interest rate relief is delivered.”
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Last modified: July 12, 2024
