Canadian home sales stabilize in May

There are early signs that Canada’s housing market is defrosting. After a chilly spring market, in which home sales hit a 16-year low in March, transactions have started to tick up on a monthly basis in May, indicating buyers are feeling more confident despite ongoing tariff and economic uncertainty.

According to the Canadian Real Estate Association (CREA), a total of 49,423 homes sold over the course of the month; while still down by 4.3% on an annual basis, that marks a 3.6% increase from April, the first gain in activity recorded since November. The year-over-year gap has also narrowed, compared to a drop of 9.3% last month.

CREA says that the monthly increase was concentrated in the Greater Toronto Area, Calgary, and Ottawa markets, and could signal that the lack of demand in the first half of 2025 was temporary, as would-be buyers came to terms with tariff threats and market volatility.

“May 2025 not only saw home sales move higher at the national level for the first time in more than six months, but prices at the national level also stopped falling,” said Shaun Cathcart, CREA’s Senior Economist.

“It’s only one month of data, and one car doesn’t make a parade, but there is a sense that maybe the expected turnaround in housing activity this year was just delayed for a few months by the initial tariff chaos and uncertainty.”

Canadian housing market remains balanced

The Canadian housing market continues to be well supplied, with a total of 109,077 homes brought to market in May, up 8% compared to the same time frame last year. On a monthly basis, that works out to an uptick of 3.1%, which was largely balanced by a similar increase in sales.

As a result, says CREA, the sales-to-new-listings ratio – a guage of the level of competition within a marketplace – remained virtually unchanged, at 47%, from 46.8% in May. This ratio is calculated by dividing the number of sales by the number of new listings that come to market per month, and determines the level of buyer balance. CREA defines a ratio between 45 - 65% as a balanced market, with below and above that threshold as buyers’ and sellers’ markets.

Overall, there were 201,880 homes available for sale at the end of May, up 13.2% year over year. However, CREA points out that this is actually 5% below the long-term average of 211,500 listings. This works out to a total of 4.9 months of inventory (the amount of time it would take to full sell off all available homes for sale in current market conditions).

“May saw an increased number of new listings hitting the market early in the month, followed by a higher number of transactions in the second half of the month, so overall more sellers and buyers compared to April,” said Valérie Paquin, CREA Chair. “It seems like this may carry over into June as well.”

Stable sales puts stop to home price declines

With short-term sales firming up and roughly in pace with new supply, there was less downward pressure on home prices; the national average came in at $691,299. That’s down a slight 1.8% on an annual basis. However, the MLS Home Price Index (HPI), which measures the most typical type of home sold, was virtually unchanged on a monthly basis. It’s the first pause following three consecutive months of declines, says CREA.

What’s next for Canadian home sales and prices?

While the data shows early optimism, it’s too soon to tell if buyers are indeed returning to the market en masse – and the ever-shifting global and trade landscape could easily spook people back to the sidelines. However, it does appear that the impact of tariffs – at least for now – is less severe than initially thought, and there’s a tentative sense of economic stability. 

The short- to medium-term outlook for mortgage rates is also fairly stagnant. The Bank of Canada has opted to keep  its trend-setting overnight lending rate at 2.75% in its recent June and April announcements, and will likely remain on hold as long as core inflation remains sticky.

The US Federal Reserve – the American counterpart to the Canadian central bank – most recently held its own rate, as the US labour market and inflation have yet to show signs of tariff-induced stress. This gives the BoC more room to stick to its holding pattern, as alignment between the two central banks puts less pressure on our currency. This means that variable mortgage rates and other prime-based borrowing products, will remain unchanged for now.

Bond yields have crept up to the 2.9% range over the last two weeks, in response to growing concerns over inflation and fiscal debt levels, both in the US and Canada. That’s kept a firm floor under fixed mortgage rates. While the lowest insured five-year fixed mortgage rate in Canada remains 3.84% (and three-year fixed at 3.89%), fixed rates could move higher if bond yields rise further. 

Due to this, it’s a great idea for anyone shopping for a mortgage rate to take out a rate hold, or consider locking in now with a pre-approval, to secure today’s mortgage rate pricing.

Also read:

• Recovering home prices made it tougher to afford a home in May
• Canadian CPI comes in at 1.7% in April as energy prices plunge
• April Canadian home sales flat as buyers stick to the sidelines
• Canada housing affordability and market trends
• Bank of Canada holds target interest rate at 2.75% in June 2025 announcement