House for sale

Home sales saw the largest year-over-year increase in more than two years in July but were little changed from the previous month, the Canadian Real Estate Association said Tuesday.

On a non-seasonally adjusted basis, sales edged up 8.7% from the prior July to 41,186.

Seasonally-adjusted sales amounted to 40,028, a 0.7% drop from June. Sales were up in July in more than half of all local markets, but a decline in the Greater Toronto Area, a typically hot housing market, tipped the national figure “slightly negative,” CREA said.

The association has seen signs of stabilizing across the national housing market since May as prospective buyers acclimatize to a higher interest rate environment than many were anticipating.

“July continued along the same trend we’ve seen emerge in recent months, with sales levelling off and new listings returning in more normal numbers,” Larry Cerqua, CREA’s chair, said in a press release.

“This has been giving buyers more choice and balancing the market, which as of July was also slowing the rate of price growth.”

The average home price was $668,754, up 6.3% from a year earlier.

On a seasonally-adjusted basis, the average was $690,867, a 2% slide from June.

Meanwhile, new listings ticked down 0.2% from last year to 73,215 and rose 5.6% on a seasonally-adjusted basis to 67,636.

Shaun Cathcart, CREA’s senior economist, said the numbers indicate housing markets have settled down in recent months and prices are moderating.

Sales and price growth, he said, are already showing signs of tapering off in August because of the Bank of Canada’s mid-July interest rate hike and messaging suggesting that inflation will be well above its 2% target for longer than expected.

“We’re probably looking at another round of ‘back to the sidelines’ for some buyers until there’s a higher level of certainty around interest rates going forward,” Cathcart said in a press release.

In a report on Tuesday, National Bank Financial Inc. also noted the market was stabilizing, with sales through the first seven months of the year down 17.2% compared to the same period last year.

“With the growing impact of interest rate hikes and our expectation for a slowing labour market, the real estate market could continue to lose momentum in the months ahead,” NBF said.

“However, the record demographic growth we are currently experiencing in the country prevents a significant drop in activity.”

In a separate report, BMO Capital Markets said that high mortgage rates and a possible softening in the job market will likely be cancelled out by the demographic demand, with prices stagnating the rest of the year.

But with inflation above 3% in July and the possibility of another interest rate increase looming, Toronto broker Cailey Heaps said buyers with mortgage approvals already in hand will be keen to take advantage before their rate increases in the fall.

“I expect September and October will be busy as a result,” she wrote in an email.

Heaps finds the summer months tend to be slow but July was “surprisingly strong.”