Condo buyers and other prospective homebuyers have stayed on the sidelines following the Bank of Canada’s overnight interest-rate cut, says a new Royal LePage report.

The BoC lowered its prime rate to 4.75% from 5% after a series of holds and rapid increases. But contrary to expectations, buyers have not rushed back onto the market.

Royal LePage described the conditions as “the spring market that never was.”

“This spring, with bank rate cuts highly anticipated, we saw some buyers race to get a deal done ahead of an expected spike in demand,” said Phil Soper, the firm’s president and CEO. “Yet, when that first cut finally occurred in early June, market response was tepid,” said Soper.

The Canadian residential market remains in a prolonged catch-up period, according to Royal LePage. But the company expects activity to pick up if interest-rate cuts continue.

“Not surprisingly, the quarter-point cut to the bank rate didn’t substantially improve the affordability picture,” said Soper. “As for consumer sentiment, our early year research indicated that only one in 10 potential homebuyers would be motivated by a tiny rate drop. The tale the market tells as rate cuts get to the point of a material reduction in the cost of borrowing should be a very different one.”

The market is struggling to find a consistent rhythm, he added. Unusual dynamics have resulted in prices rising while sales and inventory declined.

In the second quarter, the overall national aggregate home price increased 1.6% on a quarter-over-quarter basis as activity slowed in the country’s largest and most expensive markets, including Toronto and Vancouver.

“The silver lining: inventory levels in many regions have climbed materially,” said Soper. “This is the closest we’ve been to a balanced market in several years.”

The median condo price rose 0.8% to $596,500 in the second quarter of 2024. Meanwhile, the median price of a single-family home increased 2.2% to $860,800.

The national aggregate home price has remained well above COVID-19 pandemic levels. It’s up 30.8% from the same period in 2019.

Quebec City saw the largest year-over-year aggregate price increase (10.4%) among major markets, along with the highest year-over-year median condo price increase (12.7%.) But Quebec City’s new median condo price of $290,200 was modest compared to those in larger cities.

The pandemic and post-pandemic rebound continue to “wreak havoc” on residential real estate prices, said Soper. But, he added, a roughly 30% rise in home value spread over a five-year period equates to a 6% annual increase and means that the market is approaching long-term norms.

“The market has a way of correcting mistakes,” he said.