Canada’s housing market continued to cooldown in May ahead of a long-awaited rate cut in June

Home prices and sales activity in Canada fell slightly in May, although market watchers will be eagerly watching June data to see how potential home buyers react to the Bank of Canada’s interest rate cut earlier this month.

New data released by the Canadian Real Estate Association (CREA) showed the benchmark price of existing residential properties fell 0.2% month-on-month in May, falling to $714,300, with sales down 0.6% from the previous month.

Meanwhile, the number of newly listed properties on the market rose 0.5% in May, providing a small boost to homebuyers who have recently faced limited choice due to a lack of supply.

The results marked another sleepy month for the national housing market, according to CREA senior economist Sean Cathcart, who added that May could be the last month of relatively cool sales and prices following the Bank’s recent decision to cut rates for the first time in four years.

“The psychological impact of lower rates on many who waited on the sidelines has undoubtedly been enormous,” he said in a statement accompanying the release of the data. “The question now turns to further rate cuts – specifically, how fast and how far?”

On June 5, the Bank cut its benchmark interest rate by 25 basis points (0.25%), with leading economists suggesting further cuts could come in July – and that rates could fall as much as a percentage point by the end of this year.

Canada’s housing market has rebounded during the COVID-19 pandemic, with prices skyrocketing and activity soaring, but the start of rate hikes by central banks in early 2022 helped slow that momentum and cause a prolonged downturn in the housing market.