Though home sales have increased, experts say it's too early to declare a market rebound.Christinne Muschi/The Canadian Press
Canadian home sales climbed 3.6 per cent in May in the first increase since November, but the real estate industry cautions it is too early to say the country’s housing market is rebounding after a two-year slump.
There were 37,626 home sales last month after adjusting for seasonal influences, according to the Canadian Real Estate Association, or CREA. That was higher than April when selling activity was essentially flat after months of consecutive declines. The swell in activity was similar to November when sales rose 3.2 per cent month over month.
“At this point I’d say the market is looking like it is forming a bottom,” said CREA senior economist Shaun Cathcart.
“It will be clear by fall if the market is obviously rebounding or if this was a head fake,” he said in an e-mail.
The national home price index, which adjusts for pricing volatility, was essentially unchanged at $690,900 in May after mostly declining since the summer of 2023.
The real estate industry and economists had expected the housing market to recover as borrowing became cheaper and the federal government loosened some of its mortgage policies.
But the uncertainty brought on by the U.S. trade war has dampened enthusiasm for homebuying. Would-be buyers do not want to make a big purchase if they don’t know whether they will have a job or they are unsure about the state of the economy.
Analysis: Home prices are falling, and Canada is losing its secret weapon for stoking GDP growth
Home prices are still relatively high even though they have decreased. Many prospective buyers are still not able to afford a mortgage. And buyers do not want to make a purchase if they believe home prices will continue to fall.
“It is still pretty slow out there and there’s lots of uncertainty,” said Victor Tran, a mortgage broker in the Toronto region with nearly two decades of experience.
Mr. Tran, a mortgage and real estate expert with rate-comparison website Ratesdotca, said he is mostly getting inquiries from existing homeowners whose mortgages are up for renewal.
Even if the Bank of Canada makes further cuts to its benchmark interest rate, which is currently 2.75 per cent, Mr. Tran does not think it will spur much more activity.
“It’s still a struggle to make the payments every month,” he said.
More homeowners put their properties up for sale, with new listings rising 3.1 per cent from April to May. Sales as a percentage of new listings were 47 per cent, which was essentially the same as April but down about six percentage points from May of last year.
Last month’s 8.4-per-cent increase in sales in the Toronto area helped boost the country’s overall activity.
The Toronto condo market has been deluged with properties for sale and few buyers. However, on the flip side, demand for detached and semi-detached homes was strong.
Sales of condos in the Toronto area rose 3.6 per cent month over month while sales in detached houses rose 17 per cent over the same period, according to data from the local real estate board.
Benjy Katchen, chief executive with real estate brokerage Wahi, said there is some competition for houses in the $1.1-million to $1.5-million price range.
That is because the federal government’s new mortgage policies allow first-time homebuyers to make smaller down payments on homes that cost more than $1-million.
Mortgage defaults climb in Ontario as homeowners face renewal at higher rates
The rules now allow a 5-per-cent down payment on homes up to $500,000, and 10 per cent on homes between $500,000 and $1.5-million. Previously, buyers had to make a down payment that was at least 20 per cent of the purchase price on homes that cost more than $1-million.
Mr. Katchen said the activity is not as frenetic as during the pandemic’s real estate boom when there could be more than 12 bidders on one property. But he called it “robust activity.”
Editor’s note: A previous version of this story incorrectly said new buying rules allow down payments as low as 5 per cent on homes that cost between $1-million and $1.5-million. In fact, the rules now allow a 5-per-cent down payment on homes up to $500,000 and 10 per cent on homes between $500,000 and $1.5-million. This version has been corrected.