In May, Canada’s housing market saw a noticeable slowdown ahead of an anticipated interest rate cut by the Bank of Canada. According to the Canadian Real Estate Association (CREA), the benchmark price of a home dropped by 0.2% from the previous month to $714,300 (US$519,700). Compared to the same time last year, home prices have decreased by 2.4%. This decline reflects the cautious approach many buyers are taking amid high interest rates.
Home sales also showed a slight decrease, falling by 0.6% from April. This dip in sales is attributed to buyers hesitating due to some of the highest interest rates seen in the past two decades. These high rates have made borrowing more expensive, thereby putting additional pressure on potential homeowners.
The housing market's lethargy came just before the Bank of Canada decided to cut its key interest rate earlier this month. This move made the Bank of Canada the first major central bank to begin easing interest rates, hinting at more cuts in the future. Lower interest rates are expected to alleviate some of the affordability issues that buyers have been grappling with this year, potentially invigorating the market.
Despite the overall slump, there was a slight increase in the number of newly listed properties, which went up by 0.5% in May. Shaun Cathcart, CREA's senior economist, noted that May was a particularly quiet month for housing activity. However, he suggested this could be the last such month now that interest rates are lower. Cathcart emphasized the significant psychological impact this rate cut might have on potential buyers, who may now be more encouraged to re-enter the market.
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