The good news is that Canadian home prices appear to have hit bottom. The not so great news is that a full recovery of the housing market could still be years away.

Numbers released by the Canadian Real Estate Association this week showed that home sales rose 0.5 per cent in July from the month before, the fourth month of gains in a row.

At the same time the national benchmark home price rose 0.1 per cent, its first monthly increase in more than a year and a half.

These green shoots are giving economists’ more confidence that a recovery is underway, but no one thinks it will be quick.

“Volumes and prices have likely bottomed in the hardest-hit markets, but the recovery is going to be flat with little in the pipeline to trigger a forceful rebound,” said Robert Kavcic, senior economist at BMO Capital Markets.

“Even so, going from a deep correction to a flat and stable resale market is incremental progress, and likely removes what was a persistent drag from Canadian economic growth.”

The 457,500 homes sold in July remain a “hefty” 12 per cent below the 10-year average, said Robert Hogue , assistant chief economist at Royal Bank of Canada.

At the pace seen over the past two months it would take about two and a half years to return to average levels of activity, he said.

“This isn’t a fast track to recovery to say the least.”

RBC thinks the market turnaround could accelerate “a bit” as confidence rebuilds, but with no interest rate cuts on the horizon, population growth stalling and economic uncertainty likely to remain high any pickup would be gradual.

One interesting development is that regional markets are starting to converge after years of divergence with the hottest regions cooling off and the weakest gaining traction.

Ontario, hardest hit in the housing correction, has led national sales gains over the past four months. Sales rose in Toronto, Hamilton, Kitchener-Waterloo, London and Ottawa, and prices increased in Toronto and Ottawa, said Hogue.

Other recently robust markets such as Saskatchewan, Manitoba, Quebec and Atlantic Canada are now showing signs of topping out. Sales declined from the month before in July in Regina, Saskatoon, Winnipeg, Montreal, Quebec City, Moncton and Prince Edward Island.

Home prices continue to grow in these markets, but at a slower pace. In Montreal and Quebec City annual price gains are now less than half what they were at the start of the year, said Hogue.

RBC expects this trend to continue. Ontario’s market will improve as better affordability and job prospects unlocks pent-up demand.

Growth will slow in markets that have thrived as they are hit by deteriorating affordability, sensitivity to geopolitical events and immigration cuts.

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The bears have left the building.

In the latest Bank of America survey, 56 per cent of fund managers polled were overweight in equities, the highest level since November 2021. Cash allocations were down to “uber-low 3.5 per cent.”

“Consensus conviction is no macro landing, no Fed hike, no AI capex cut, no DEM sweep, no bears,” said the BofA strategists led by Michael Hartnett.

The survey, conducted between Aug. 7 and Aug. 13, was the third-most bullish poll of investor sentiment since 2022.

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McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

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Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff and Bloomberg.

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