Canadian home sales post ‘October surprise’ as buyers flood back

Canadian home sales rose to their highest level in more than two years as a string of interest rate cuts by the central bank started to draw buyers back to the market.

Transactions surged 7.7% in October from a month earlier to reach the highest level since April 2022, according to data released Friday by the Canadian Real Estate Association. The benchmark price for a home slipped 0.1% to C$716,800 ($509,500), the data show.

Cutting rates by the most

Last month, the Bank of Canada cut rates by the most since March 2020, picking up the pace of its campaign to boost the economy. Policymakers said they expect the housing market to respond to lower borrowing costs faster than other sectors, as prospective homebuyers gain more purchasing power from lower rates. And the Bank of Canada has signaled more rate cuts could be coming.

“The jump in home sales last month was definitely an October surprise,” Shaun Cathcart, the real estate board’s senior economist, said in a statement. “You can think of the October numbers as a sort of preview for what we might expect to see next year.”

Last month’s housing data suggest the market response may already be taking hold. While prices dropped in October, other data suggest the market seems to be tightening. The number of new listings fell 3.5% in October, partially reversing a nearly 5% surge in new inventory the previous month.

Months of inventory, a measure of supply and demand which calculates how many months it would take to clear all the homes listed at the current rate of sales, dropped to 3.7 months in October from 4.1 months in September, according to the real estate board.

“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,” said James Mabey, the chair of CREA.

BMO strategist Benjamin Reitzes said that the strength of the housing market in October supports the view that the central bank will likely cut its rate by 25 basis points at its December meeting.