July home sales saw the largest year-over-year increase in more than two years, but were little changed from June, the Canadian Real Estate Association said Tuesday.

On a non-seasonally adjusted basis, sales edged up 8.7 per cent from the prior July to 41,186. 

Seasonally-adjusted sales amounted to 40,028, a 0.7 per cent drop from June. Sales were up in July in more than half of all local markets, but a decline in the Greater Toronto Area, a typically hot housing market, tipped the national figure "slightly negative," CREA said.

The association has seen signs of stabilizing across the national housing market since May as prospective buyers acclimatize to a higher interest rate environment than many were anticipating.

“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,” Larry Cerqua, CREA's chair, said in a press release.

“This has been giving buyers more choice and balancing the market, which as of July was also slowing the rate of price growth."

The average home price was $668,754, up 6.3 per cent from a year earlier.

On a seasonally-adjusted basis, the average was $690,867, a two per cent slide from June.

Meanwhile, new listings ticked down 0.2 per cent from last year to 73,215 and rose 5.6 per cent on a seasonally-adjusted basis to 67,636.

Shaun Cathcart, CREA's senior economist, said the numbers indicate housing markets have settled down in recent months and prices are moderating.

Sales and price growth, he said, are already showing signs of tapering off in August because of the Bank of Canada's mid-July interest rate hike and messaging suggesting that inflation will be well above its two per cent target for longer than it expected.

"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," Cathcart said in a press release.

But with inflation above three per cent in July and the possibility of another interest rate increase looming, Toronto broker Cailey Heaps said buyers with mortgage approvals already in hand will be keen to take advantage before their rate increases in the fall.

"I expect September and October will be busy as a result," she wrote in an email.

Heaps finds the summer months tend to be slow but July was "surprisingly strong," though she felt the national picture was dragged down by Toronto's luxury market.

Robert Kavcic, a senior economist with BMO Capital Markets, said "the story is pretty consistent across most markets." 

"That is, the price correction found a floor and rebounded to some extent as the Bank of Canada paused but has now run into some chillier conditions with rates moving higher again."

He believes Calgary has the strongest market in Canada because prices are now about five per cent higher than their early 2022 high.

Vancouver looks relatively balanced, while Atlantic Canada continues to see sturdy conditions alongside very strong population flows, he said.

This report by The Canadian Press was first published Aug. 15, 2023.