The Canadian Real Estate Association found home sales fell for the fifth consecutive month between June and July.
On a seasonally adjusted basis, the association said sales in July fell 5.3 per cent compared with June. The actual number of sales last month was 37,975, down 29 per cent compared with July last year.
"That leaves activity back in the pre-COVID range, or roughly 40 per cent below the peak of the demand-side blowout seen last year," said Robert Kavcic, BMO Capital Markets senior economist, in a note to analysts.
"Unadjusted, it was the quietest July for sales since the financial crisis in 2020."
July's drop in month-over-month sales was the smallest of the past five months. Market watchers said it's too soon to say whether that trend will continue.
Still, economists and CREA chair Jill Oudil said it is a continuation of the market cooling from the torrid pace seen last year and early this year, when bidding wars were the norm.
Much of the cooldown has been attributed to the Bank of Canada increasing its key interest rate by one percentage point to 2.5 per cent in July in the largest hike the country has seen in 24 years.
Mortgage rate changes tend to mirror such hikes, impacting buying power.
As the rates have risen and sales plummeted, many buyers have sat on sidelines, predicting better deals will come in the fall and frustrating sellers, who have had to come to terms with the fact that they likely won't fetch as much as neighbours who sold in the winter.
"There's definitely a lot more people who are waiting until September before they list properties and they're trying not to list in August, if they don't have to," said Davelle Morrison, a Toronto broker with Bosley Real Estate Ltd.
As a result, new listings in July totalled 73,436, down six per cent from last July and on a seasonally adjusted basis, down five per cent from June.
When homes were flying off the market earlier this year, people could buy before they sold their own place and have little risk of their property not selling.
Now, Morrison is telling people to sell their place first because of how long properties are sitting.
She's also telling her clients to "buckle up" if prices fall more and interest rates continue to rise.
The average sales price was $629,971, down five per cent from $662,924 last July and on a seasonally adjusted basis amounted to $650,760, a three per cent drop from June, CREA said.
Excluding the typically heated Greater Vancouver and Toronto Areas from the calculation cuts $104,000 from the national average price.
Kavcic feels the drops constitute a market correction that is playing out "almost everywhere, but to varying degrees."
"Southwestern Ontario is feeling it hardest, with markets like Kitchener-Waterloo and London down roughly 15 per cent from their high already," he said.
He's noticed Vancouver prices have now fallen over four consecutive months and Montreal has been more immune to but is not escaping the downturn with drops in the last two months.
"We view Alberta as the market most able to weather this storm because it had already stagnated for a number of years before the pandemic, never saw the same froth as Ontario, and is now supported by near-$100 oil and population inflows from other regions," Kavcic wrote.
"But, in a demonstration of the power of higher interest rates, even Edmonton and Calgary have been subject to a flattening (Calgary) or decline (Edmonton) in prices despite still-solid sales activity."