An analysis of early housing market reports shows the Bank of Canada's last interest rate increase affected buyers differently across the country, with home sales falling in some cities while rising in others.
by economists at RBC says the June interest rate hike, as well as an expected increase next week, resulted in situations where buyers "retreated" in cities such as Toronto, Hamilton, Ottawa and Vancouver but "remained undeterred" in Calgary, Edmonton, Montreal and B.C.'s Fraser Valley.
The economists also point to "strong price gains" in Toronto, Vancouver and other parts of Ontario and B.C. this past spring as having possibly "spooked some buyers."
"The good news is that supply is continuing to rise. We estimate that more homes became available for sale in every major market last month," the report from RBC assistant chief economist Robert Hogue and economist Rachel Battaglia said.
"That came on the heels for sizable broad-based increases in May. So far the growing supply hasn't done much to ease (recently re-emerged) upward price pressure. But if sustained, we would expect the pace of property appreciation to slow in the coming months."
The report comes after RBC published another report in late June that found home ownership, according to the bank's metrics, has become slightly more affordable but is still a major issue.
In June, the Bank of Canada raised its overnight rate by 25 basis points to 4.75 per cent, its first increase since pausing hikes in January. One basis point is equal to one-hundredth of one per cent.
The bank began raising interest rates in March 2022 in an effort to control inflation, which rose to as high as 8.1 per cent last summer but has since fallen to 3.4 per cent as of June.
The RBC report focuses specifically on the latest market trends in Toronto, Vancouver, Montreal and Calgary.
The economists say they were "surprised" by how fast the markets in Toronto and Vancouver, for example, rebounded in the spring.
Home resales in Toronto jumped 32 per cent in April and May but fell 6.9 per cent month-to-month in June, the report says, despite more properties on the market.
Prices also continued to rise, with the MLS Home Price Index composite benchmark price up 2.5 per cent month-over-month to $1.16 million in June.
"But more balanced conditions point to a slower pace of appreciation in the months ahead," the report says. "Higher interest rates are poised to keep homeownership affordability extremely challenging for buyers."
Property values also rose 1.3 per cent in Vancouver last month after a combined 3.1 per cent increase in the two previous months.
"We think buyers will increasingly push back on further price appreciation in the period ahead," the economists write.
"Despite improving slightly in the first quarter of this year, housing affordability remains at crisis levels in Vancouver. No doubt this poses huge challenges for many buyers."
A "solid growth in supply" appears to have contributed to an increase in home resales in Montreal, which rose about 11 per cent month-to-month in June from 8.1 per cent in May and 3.9 per cent in April.
The number of new listings also increased 16 per cent in the previous three months, although the median value for a single-detached home was unchanged from May to June.
Home resales in Montreal are still about 15 per cent below pre-pandemic levels, however, the report says.
Calgary also saw "significantly" more homes on the market in the last two months, with home resales up about nine per cent month-over-month in June from six per cent in May.
But with demand still well above supply, prices rose 4.4 per cent year-over-year.
"Calgary's impressive population growth and relatively affordable position (compared to other major Canadian cities) will likely keep this trend going over the back half of the year," the report says.
With files CTVNews.ca Writer Alexandra Mae Jones, CTV National News Producer Jordan Gowling and The Canadian Press
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