The plunge in Toronto-region home sales helped push down the average Canadian home price by 0.3 per cent to $478,696 in July — the first year-over-year decline since 2013.

The number of homes sold on the Multiple Listings Service (MLS) also dropped for a fourth consecutive month by 2.1 per cent between June and July, the Canadian Real Estate Association (CREA) reported on Tuesday.

But the Toronto region and local markets in the nearby Greater Golden Horseshoe saw the least precipitous drop since the Ontario government announced its 16-point Fair Housing Plan in April.

That could be because a July rise in interest rates pushed some pre-approved buyers into action, said the association.

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“Sales may be starting to bottom out amid stabilizing housing market sentiment. Time will tell whether that’s indeed the case once the transitory boost by buyers with pre-approved mortgages fades,” said CREA chief economist Gregory Klump in a news release.

The supply of new listings has also slowed. Listings were up 5 per cent year-over-year in the Toronto area last month, compared to a 16 per cent increase in June and a jump of 49 per cent in May.

Listings were also down in Calgary, Edmonton, Montreal and northern British Columbia, which was affected by this summer’s wildfires, said CREA.

In the Toronto region, the number of sales was down 40 per cent year-over-year, although average prices rose 5 per cent in the same period. They were, however, down about 19 per cent between April and July of this year — from a peak of $919,449 to $746,216.

Excluding Greater Vancouver and Greater Toronto, the national average price was $381,297, up from $365,033 a year ago.

Sales were down in two-thirds of Canadian markets, including Calgary, Halifax and Ottawa, as well as the Toronto area.

Some Toronto-area realtors say they are cautiously optimistic that things will turn around in the fall. Showings are picking up, a positive sign that buyers could be set to jump off the fence where they have sat since the spring, said Toronto realtor John Pasalis, president of Realosophy Realty.

The big unknown, he said, is the volume of listings that will come on the fall market.

“That can skew the market significantly. If we see a significant increase in the number of listings sitting in the market relative to the increase in demand from buyers, we’re going to have a very slow market even if buyers are jumping back in.

“A lot of agents are predicting a very heavy volume of new listings both from the people who couldn’t sell in the summer, and a lot of move-up buyers (who) are probably inclined to sell first before they buy this time,” said Pasalis.

Broker Gurinder Sandhu says he is cautiously optimistic that the psychological pause homebuyers have exercised since the provincial housing announcement, which included a 15 per cent foreign buyers tax and expanded rent controls, will end in the fall and the market will return to normal.

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“We haven’t had a normal market in a long time,” said the executive officer/owner of Re/MAX Realty Services.

Economic fundamentals support large-ticket purchases, including housing, he said.

“What we see is the Canadian consumer is still confident in the economy. The economy continues to grow in and around 2-plus per cent. Jobs continue to be created at a healthy rate and unemployment is probably among the healthiest rates we’ve seen in a long time,” said Sandhu.

The return to equilibrium is better for buyers and sellers, but those listing their homes need help recalibrating their expectations, he said.

“We are not in the market we had in the first four months of the year. That was a fantasyland. That was short-lived but now we’re back to a market where houses are not going to sell in a matter of hours,” said Sandhu.

It will take months or weeks in some cases.

Another small rise in interest rates won’t have much impact, he said.

But Pasalis said that a bigger question mark is the possibility that banks will expand mortgage stress testing, something Canada’s bank regulator, the Office of the Superintendent of Financial Institutions, is considering.

“It would put a lot of buyers on hold as they adjust to these changes,” he said.

With files from The Canadian Press

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