By Paul Vieira


OTTAWA-Canada existing-home sales rose in June, and prices posted their first month-over-month increase in nearly a year, according to data from the Canadian Real Estate Association.

Yet, the association revised downward its forecast for this year and next, citing a weaker-than-usual spring season, a buildup of housing inventory on the market, and a lack of buyers in the market despite the possibility of further cuts in interest rates. Economists say the fear that Canada's housing market would reignite following a cut in the Bank of Canada's policy rate has yet to materialize.

The association's data indicate national home sales rose 3.7% on a seasonally-adjusted basis in June from the previous month. On an unadjusted basis, sales activity in June was 9.4% below year-ago levels.

"It wasn't a 'blow the doors off' month by any means, but Canada's housing numbers did perk up," Shaun Cathcart, economist at the real-estate association, said.

The real-estate data indicated that benchmark house prices, calculated in a similar fashion to the S&P CoreLogic Case-Shiller National Home Price Index, rose in June by 0.1%, or the first increase in 11 months, to 717,700 Canadian dollars, or the equivalent of $526,423.

The association said prices are "still generally sliding sideways" across much of Canada. On a one-year basis, benchmark prices fell 3.6%, although they remain nearly 40% above 2019 levels. House prices surged during the pandemic, as people looked for bigger properties and took advantage of rock-bottom borrowing costs.

The association said it revised downward its expectations for sales and prices this year and next. It expects existing-home sale transactions to total about 472,000 this year, or down 4.2% from its previous prediction in the second quarter. The national average house price is expected to climb to C$694,393, but that too is slightly lower than its previous forecast.

Figures across Canada indicate the number of properties on the market are increasing at a faster pace than home sales. Royal Bank of Canada economists said this week this development is tipping the scales in some regions toward a so-called buyer's market.

Gauges of housing affordability - or how much after-tax income is required to cover shelter costs - remain historically stretched. A poll released Friday from Ottawa-based Abacus Data suggested that nearly three-quarters of Canadians believe the initial rate cut last month from the Bank of Canada would have minimal impact on housing affordability. Further, nearly half, or 46%, of Canadians polled said they don't believe the rate cut would trigger increased home-sale activity.

"Any concern the Bank of Canada might have had that the market would spring back to life when it pulled the rate trigger seems to have evaporated, as buyers, but not sellers, are missing in action," said economists at BMO Capital Markets. "If anything, the housing market is telling the Bank of Canada that more - maybe much more - rate relief is needed."


Write to Paul Vieira at paul.vieira@wsj.com


(END) Dow Jones Newswires

07-12-24 1025ET