Figures released this week by the Canadian Real Estate Association showed that in July, home sales rose by 0.5% compared with the previous month—marking the fourth consecutive month of growth. At the same time, the national benchmark home price index increased by 0.1%—the first monthly gain in more than a year and a half.
These “green shoots” give economists more confidence that the recovery has begun, but no one expects it to be fast. “Volumes and prices have likely bottomed out in the hardest-hit markets, but the recovery will be sluggish, without factors capable of triggering a sharp rebound,” said Robert Kavcic, senior economist at BMO Capital Markets.
“Nevertheless, the shift from a deep correction to a flat and stable resale market is gradual progress that likely removes a persistent drag on Canada’s economic growth.”
A long road back to normal
The 457,500 homes sold in July are still a “significant” 12% below the 10-year average, noted Robert Hogue, assistant chief economist at the Royal Bank of Canada.
At the pace seen over the past two months, it would take about two and a half years to return to average activity levels, he said.
“That is, to put it mildly, not a fast track to recovery.”
RBC believes the market’s turnaround could accelerate “a little” as confidence returns, but since interest-rate cuts are not expected in the near term, population growth is slowing, and economic uncertainty is likely to remain high, any upswing will be gradual.
Regional differences are narrowing
An interesting trend: regional markets are beginning to converge after years of divergence—the “hottest” regions are cooling, while the weakest are gaining momentum. Ontario, the province hit hardest by the housing-market correction, has led the country in sales growth over the past four months. Sales rose in Toronto, Hamilton, Kitchener-Waterloo, London, and Ottawa, and prices increased in Toronto and Ottawa, Hogue said.
Other previously resilient markets, such as Saskatchewan, Manitoba, Quebec, and Atlantic Canada, are now showing signs of leveling off. In July, sales fell compared with the previous month in Regina, Saskatoon, Winnipeg, Montreal, Quebec City, Moncton, and Prince Edward Island.
Home prices in these markets continue to rise, but at a slower pace. In Montreal and Quebec City, the annual pace of price growth is now less than half of what it was at the start of the year, Hogue said.
RBC expects this trend to continue. Ontario’s market will improve as better affordability and employment prospects unlock pent-up demand.
Growth will slow in markets that had been booming, as they face worsening affordability, sensitivity to geopolitical events, and reduced immigration. “The bears have left the building.”
Investor sentiment
In the latest Bank of America survey, 56% of fund managers surveyed were overweight equities in their portfolios—the highest level since November 2021. Cash allocations fell to an “extremely low” 3.5%.
“The consensus conviction is: no macro landing, no Fed rate hikes, no cuts to AI capex, no Democratic sweeps, no bears,” wrote BofA strategists led by Michael Hartnett.
The survey, conducted from August 7 to 13, was the third most bullish reading of investor sentiment since 2022.
