Canada's housing market is showing further signs of stabilization, with home sales and prices appearing to be nearing a bottom in some of the hardest-hit markets, BMO Capital Markets said in a Tuesday note.
"Going from a deep correction to a flat and stable resale market is incremental progress, and likely removes what was a persistent drag from Canadian economic growth," wrote BMO Senior Economist Robert Kavcic.
Existing home sales increased 0.5% on the month in July, marking a third consecutive monthly gain, but remained 5.3% below year-ago levels, according to data the Canadian Real Estate Association (CREA) released earlier Tuesday. New listings declined 1.6% from June and 6.9% year over year, helping keep overall market conditions close to balanced.
Prices are showing signs of stabilization as well, said the bank. The national benchmark price was 3.2% lower than a year earlier but edged up 0.1% from June, while the three-month annualized pace has now flattened after a sharp decline earlier this year.
Regional housing conditions remain uneven, added BMO. Vancouver and Southern Ontario continue to experience weaker markets, while Calgary and Edmonton have cooled from their previously stronger levels. Atlantic Canada remains relatively tight, while Montreal and Quebec continue to demonstrate resilience.
Housing construction is also losing momentum, with starts declining for a third consecutive month to 229,000 annualized units, according to Tuesday's Canada Housing and Mortgage Corporation (CHMC) data.
The slowdown is largely tied to a rebalancing in ownership and condominium construction, while strong purpose-built rental activity continues to provide support for overall building levels, added the bank.