Housing market ‘rebounded' in July, CREA says, but prices could soon spike
Total home sales across Canada increased 3.8 per cent compared with the previous month, and marked the fourth straight monthly increase, according to the latest data from the Canadian Real Estate Association (CREA).
More listings are also expected to be added to the market by the fall and prices are rising at a slower pace than sales growth. Although this may seem like good news for buyers right now, industry experts believe it may not last long as demand is expected to catch up with available supply by next year.
At least one economist believes the situation is heading more towards a seller's market, and prices could soon spike — potentially locking many would-be homebuyers out of options.
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'It looks like the 'rebound' is underway and it'll be interesting to see what happens now that supply has also turned a corner and is falling again. So markets are tightening up,' senior economist Shaun Cathcart at the CREA says in an interview with Global News.
'Home prices have been rising, but are still stable at the national level. I think we may see (price) gains creep in as early as this fall.'
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Saskatoon experiencing strong housing market this summer
Why the slow start to the housing rebound?
Interest rates had long dominated conversations around the housing market in Canada, after borrowing costs were increased gradually by the Bank of Canada starting in 2022 to combat spiking inflation — including in the form of a red-hot housing market.
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After rates started coming down to a more 'neutral level, meaning high enough to maintain price stability while still allowing for the economy to expand, it was expected that home sales would start to increase as more buyers could qualify for mortgages.
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'Interest rates aren't expected to do much of anything (this year). Even if we get the one (rate cut), there's not another one after that. At this point, we're sort of where we are. The Bank of Canada is rated 'neutral,'' Cathcart says.
With rates hitting that 'neutral' level, many would-be buyers would have started looking for a home sooner this year, but the trade war threw a wrench in some people's plans.
Shortly after stepping into the Oval Office, United States President Donald Trump began imposing tariffs on countries, including Canada. This meant many of those potential buyers may have held back on big purchase plans like a home for fear of how the economy may evolve.
'If you go back to January 20, the afternoon when President Trump came from his inauguration, sat down in the Oval Office and said, 'I'm putting 25 per cent blanket tariffs on Canada,' I heard some early estimates of a million job losses. It would have been an absolute disaster,' Cathcart says.
'In the end, it hasn't been that bad. Even though it's at 35 per cent now, things are exempt. So as long as that trade deal holds, this is more of a sector-specific problem. So, a lot of the initial worries I think have faded a little bit. That can obviously change, but not surprising to see that people are starting to get on with their lives again.'
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How might things change in the fall?
The CREA's report shows the amount of new homes added to the Canadian housing market in July was virtually unchanged, with an increase of 0.1 per cent compared with June, but seasonal trends dictate that more homes will likely be added to the market by the fall.
The home price index, which factors in seasonal adjustments, was virtually unchanged in July compared with June, and down 3.4 per cent compared with the same period in 2024.
Although more listings are expected later this year, the long-term outlook for housing supply has been a critical issue that the federal government is taking action on.
The supply and demand theme of the housing market means that the more demand there is for homes to buy, the higher the asking price ultimately will be. This would be the case unless there are more homes added to the housing market, which would help stabilize prices.
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'When you look at the fall market, I think it'll be balanced, but also a healthy market for buyers coming in. It's next year that we really have to look into, 'Will it turn into a seller's market?' where the market really picks up, and it gets really hot, and where people have to start being competitive in terms of purchasing?' area vice-president Kingsley Ma at Remax Canada says.
'We're looking at a balanced market from now until the end of the year and perhaps the first half of next year, when the demand has to catch up with the whole inventory.'
Prime Minister Mark Carney has been working on the Build Canada Homes plan, which aims to build nearly half a million new homes annually for 10 years.
'Build Canada Homes is probably the biggest, most ambitious sort of homebuilding ever in Canada,' Cathcart says.
'I think the main thing around supply for the government to consider and governments and for policymakers is, let's make sure we get this right.'
Although the plan could provide needed supply to the Canadian housing market as demand continues to increase, it may be more of a long-term plan. One of the issues that may be hindering developers from committing to new home construction projects is the costs.
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'It definitely seems to me like the property types that make the most sense just don't make the most money,' Cathcart says.
'If you look at completions right now … 70 per cent are small apartments. The single detached home is basically an endangered species at this point. The ones that are getting built are mansions. The missing middle is still missing, and there's a role, I'm sure, for policy there.'
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