Canadian home prices stabilized in July after falling a cumulative 4.1% over the previous seven months, according to the Teranet-National Bank Composite Index released on Thursday.
The stabilization came as resale activity recovered for a fourth consecutive month, said National Bank Capital Markets, which published the survey.
While sales remain below historical averages, broadly balanced market conditions have supported prices, particularly in Vancouver (+0.7%) and Toronto (0.0%), where resale markets have tightened.
Toronto has been a key driver of the stabilization, with recovering sales helping prices hold steady for a second straight month in July after declines in 15 of the prior 17 months, added the bank. Toronto and Vancouver together account for 61.1% of the composite index, with weights of 40.3% and 20.8%, respectively.
The recent national recovery in transactions likely reflects improving labor-market conditions and better affordability, while price declines in major cities may have also drawn buyers back, said National Bank.
"If the sales recovery continues, it could eventually bring price growth back into positive territory," wrote the bank's Senior Economist Daren King.
Continued sales gains could eventually return home-price growth to positive territory, though trade uncertainty, elevated fixed mortgage rates and slower population growth are likely to constrain the recovery, added the economist.