Photo: James Bombales

After a first quarter of month-over-month home sales declines, the second quarter of 2018 brought some relief for the Canadian housing market, with a jump in activity in both June and July.

Now, the TD Economics team is saying that the market may have balanced out heading into the fall.

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“Notably, the housing market has attained a modicum of stability,” they write, in a recent note.

The team predicts that the Q2 jump in home sales could cause the Bank of Canada (BoC) to hike the overnight rate in October. The Bank hiked the rate to 1.50 per cent in July, and is widely expected to do so again before the end of the year.

“Residual expectations for a September rate hike almost entirely disappeared after the slightly below consensus reading on Q2 GDP, but markets are still firmly anchored around tightening in October,” writes the team.

Last week, TD economists Derek Burleton and Rishi Sondhi noted that, heading into the second half of 2018, strong economic conditions should bolster housing markets across the country.

“Sales and prices should gain traction across most major markets as the year continues to roll forward, as the effects of [new mortgage rules] fade away,” they wrote.

They added that the market seems to be responding in “textbook fashion” to the mortgage stress test introduced in January, which many economists had predicted would have only a temporary dampening effect on housing activity.

“Our longstanding view has been that Canada’s major housing markets would regain traction after the initial sharp knee-jerk policy adjustments,” they wrote. “Past experience has shown that markets begin to stabilize after about 4-6 months following the implementation of major changes to housing policy.”

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