May was ‘another sleepy month’ for homebuyers. Will a rate cut wake them up?

The Canadian Real Estate Association says that homebuyers were sleepwalking through the spring, but the first interest rate cut in more than four years could serve as a wake-up call.

CREA’s home sales figures show transactions dipped 0.6 per cent between April and May. Home prices are also “largely sliding sideways,” with the average resale price floating just below $700,000 in the month, down four per cent annually.

“May was another sleepy month for housing activity in Canada, although it may prove to be the last of those now that interest rates have moved lower,” said CREA senior economist Shaun Cathcart in a statement.

May’s sales figures came in before the Bank of Canada’s decision at the start of this month to cut its policy rate by 25 basis points, broadly lowering the cost of borrowing and signalling the start of an expected easing cycle. The pace at which future cuts come, however, is uncertain.

“The Bank of Canada’s June 5 rate cut may have only been 25 basis points, but the psychological effect for many who have been sitting on the sidelines was no doubt huge,” Cathcart said. “The question now turns to further rate cuts — specifically, how fast, and how far?”

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Ipsos polling conducted exclusively for Global News after the Bank of Canada rate cut showed that most would-be buyers said they would remain on the sidelines despite easing borrowing costs, indicating more drops were needed before they would get into the housing market.

Most Canadian housing markets have seen an uptick in the number of homes for sale in 2024, CREA noted. The number of newly listed homes was up half a percentage point month-to-month in May. A slowdown in sales means homes are listed for longer with more choice for the scant buyers in the market.

At the end of last month, there were roughly 175,000 properties up for sale on CREA’s multiple-listings service, up 28.4 per cent from the same time last year but still below historical averages.

“The spring housing market usually starts before all the snow has melted, somewhere around the beginning of April, but this year I believe a lot of people were waiting for the Bank of Canada to wave the green flag,” said CREA chair James Mabey in a statement.