Bank of Canada's rate cuts drive a 7.7% jump in October home sales, signalling a tightening market
Canadian home sales in October reached their highest level since April 2022, driven by a 7.7 percent surge in transactions compared to the previous month, as reported by the Canadian Real Estate Association (CREA).
According to BNN Bloomberg, the benchmark home price declined slightly by 0.1 percent to $716,800.
This growth follows a series of interest rate cuts by the Bank of Canada aimed at stimulating the economy.
The Bank of Canada implemented its largest rate cut since March 2020 in October, signalling an expectation that the housing market would respond more quickly to lower borrowing costs than other sectors.
Policymakers believe reduced rates enhance purchasing power for prospective buyers, and additional rate cuts may follow.
“The jump in home sales last month was definitely an October surprise,” said Shaun Cathcart, CREA’s senior economist. “You can think of the October numbers as a sort of preview for what we might expect to see next year.”
The October data suggests tightening market conditions, even as prices declined. New listings dropped by 3.5 percent, partially reversing a nearly 5 percent surge in September.
Months of inventory, which measures how long it would take to sell current listings at the current sales pace, fell to 3.7 months from 4.1 months in September. This decline indicates a more competitive market.
CREA chair James Mabey noted that buyers appeared active since rates began to fall in early summer but waited for suitable properties to enter the market.
“October’s strong sales numbers across Canada suggest buyers have been in the market since rates began to fall in early summer, but they were waiting for the right property to come up for sale, which didn’t happen in a big way until September,” Mabey explained.
BMO strategist Benjamin Reitzes commented on the October market strength, saying it supports the expectation that the Bank of Canada will likely lower rates by 25 basis points in December.
The recent trends indicate the housing market’s responsiveness to monetary policy changes and set the stage for further developments in the coming months.
