Canada’s housing market continued its slowdown last month, with the average selling price of a home touching $665,850 — a decline of almost 20 per cent since February.

The Canadian Real Estate Association (CREA), which represents more than 100,000 brokers, agents and salespeople across the country, said Friday that the volume of home sales fell by 5.6 per cent during the month, and is down by almost one-quarter compared to last year.

“Activity continues to slow in the face of rising interest rates and uncertainty,” CREA chair Jill Oudil said in a statement.

After rising at a rapid pace for much of the pandemic, higher interest rates slammed the brakes on Canada’s housing market this spring.

Average selling prices have declined each month since February 2022, and are down by 1.8 per cent compared to what they were a year ago.

“What goes up must come down, and the Canadian housing market continued to cool in June under the weight of higher interest rates,” TD Bank economist Ksenia Bushmeneva said.

Ontario led the way down, as selling prices in the province’s suburban markets that rose the most during the pandemic are now coming back to earth.

“Sales and prices are down disproportionately more in Ontario and B.C., which suffered severe affordability deteriorations during the pandemic,” Bushmeneva said. “We expect that home prices and sales will move even lower amid further pressure from borrowing costs.”

She isn’t the only one thinking the market still has a way to go before bottoming. Waleed Hamed has been on the sidelines of Canada’s housing market for years, waiting for a chance to buy, but he said he could never justify making the leap.

The market in and around Courtice, Ont., where he’s living with his parents, has definitely turned in recent months, he said. Yet Hamed is still reluctant to buy, because he thinks further price declines are coming.

“I think we are going to see prices drop for a while,” he told CBC News in an interview this week. “I still feel like we are near the very top.”

Lower prices may favour buyers, but many like Hamed are discovering that homes are no more affordable because the cost to finance a mortgage has gone up by more than the drop in prices.

The Bank of Canada hiked its benchmark interest rate by a full percentage point this week, the largest one-time increase since 1998. It’s the fourth rate hike since the start of the year, and more are on the way in the face of record-high inflation.

That’s increasing the costs for anyone with a variable rate mortgage, and making it harder to qualify for one, too. Variable rate loans are currently hovering at around four per cent, up from under two per cent at the start of the year. 

But because of stress test rules implemented several years ago, borrowers have to qualify at rates even higher than the loan term itself. The stress test level for a variable rate loan is now at about six per cent, a bar that many borrowers may not be able to meet.

“Anyone upset that a rising overnight rate is hurting real estate values should keep in mind that the Bank of Canada’s role isn’t to look out for the housing market or individual homeowners,” Clay Jarvis with fintech company Nerdwallet. “That’s the job of the mortgage stress test — which we should be thankful for right about now.”

“Homebuyers are still stuck between a rock and a hard place,” Jarvis said. “The hard place (the market) is a little softer, but the rock (interest rates) is getting higher with every rate hike.”

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