(Bloomberg) -- Toronto home prices fell for the third straight month, as rising interest rates spur an abrupt reversal in a city recently at the heart of one of the world’s hottest housing markets.

The average selling price for a home in Canada’s largest city fell 3.1% in May to C$1.18 million (about $939,000) on a seasonally-adjusted basis, according to data Friday from the Toronto Regional Real Estate Board. Toronto hasn’t seen three consecutive months of price declines since early 2019. 

Prices have now declined nearly 9% from their February peak. 

Until recently, Canada had some of the fastest home-price increases in the world, with Toronto and smaller communities in the province of Ontario leading the way as buyers took advantage of low rates and sought more space to work remotely. Now, as the central bank tries to rein in inflation that’s running at nearly 7%, borrowing costs are rising quickly. 

READ MORE: Bank of Canada Sees Higher Odds of Rates Over ‘Neutral’ 3% Range

Since the beginning of March, the Bank of Canada has raised its key policy rate from 0.25% to 1.5% while signaling even more aggressive increases could be coming. Commercial banks have raised variable mortgage rates in lockstep and buyers have fled the market. The number of home sales fell 9.3% in May from the month before, also the third straight month of declines on a seasonally-adjusted basis, the Toronto board said. 

“There is now a psychological aspect where potential buyers are waiting for a bottom in price,” Kevin Crigger, the Toronto real estate board’s president, said in a release accompanying the data. “This will likely continue through the summer.”

Meanwhile, sellers keep piling in. The number of homes for sale in the city jumped 26% last month from May 2021. That combination has allowed the remaining buyers to be choosier, and properties are staying on the market slightly longer -- an average of 18 days before being sold, up from 15 a year ago. 

And in a sign that the Bank of Canada’s rate hikes may be starting to bite in markets outside Toronto and its environs, a separate report Thursday from Vancouver’s real estate board showed price gains seem to have stopped there, too. The city’s benchmark home price declined 0.3% to C$1.26 million in May, while the number of sales fell below their 10-year average for that month, that report showed.

©2022 Bloomberg L.P.