The increasingly small gains seen in Canada's recent months' home sales fell into a decline in July, with sales down 0.7% compared to June.

This, the Canadian Real Estate Association (CREA) says in a new report, is another sign that activity is stabilizing — a trend that's been ongoing since May.

Interestingly, sales were still up in more than half of all local markets, but a drop in the Greater Toronto Area (-8.6%) pulled the national numbers into the negatives. British Columbia's Fraser Valley and Greater Vancouver also saw sales decline, falling 11.1% and 1.1% month-over-month, respectively. These losses helped to offset sales gains seen in Calgary (2.7%), Montreal (7%), and Edmonton (6.8%).

The biggest gain, however, was seen in the smaller Quebec CMA of Saguenay, where sales were up 21.4% compared to June. But, this was offset by a 14.2% drop in Trois Rivières' home sales.

Year over year, Canada's home sales were up 8.7%, "the largest year-over-year national sales increase in more than two years," CREA notes in the report. Ontario's Niagara region led the way with a 42.4% year-over-year increase, followed closely by the Fraser Valley (39.2%), Greater Vancouver (27.9%), and Quebec (19.3%).

“July continued along the same trend we’ve seen emerge in recent months, with sales levelling off and new listings returning in more normal numbers,” said CREA Chair Larry Cerqua. “This has been giving buyers more choice and balancing the market, which as of July was also slowing the rate of price growth."

Indeed, new listings were up 5.6% between June and July, which built on April's 2.8%, May's 7.9%, and June's 5.9% gains. These helped to bring new listings from the 20-year low seen in March "to closer to (but still below) average levels by mid-summer," CREA says.

At the end of July there were 3.2 months of inventory left across the country, which, although up just slightly from the 3.1 months seen in May and June, marks the first month-over-month increase of this measure since January.

With listings up, and handily outperforming sales, the sales-to-new-listings ratio eased to 59.2% from the 63% seen in June. Although still above the long-term average of 55.2%, it's demonstrating a shift towards a more balanced market.

As for the average price, it still climbed up in July, rising 1.1% on a month-over-month basis to $668,754. CREA notes that this is "a larger-than-normal increase for a single month but only about half as large as the gains recorded in April, May, and June." A month-over-month price gain was also observed in the majority of local markets.

Looking into August, CREA Senior Economist Shaun Cathcart is seeing further signs of market rebalancing.

“Sales and price growth are already showing signs of tapering off further in August in response to the Bank of Canada's mid-July rate hike and messaging regarding above-target inflation for longer than previously expected," Cathcart said. "We’re probably looking at another round of ʻback to the sidelines’ for some buyers until there’s a higher level of certainty around interest rates going forward.”

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