The tightening of market conditions that unfolded in the spring is “unwinding rapidly” and Toronto is now the closest it has been to a so-called buyer’s market since last winter, a new report from RBC suggests.

The report, which was released last week, shows that home sales in Toronto were down 8.7 per cent in July compared to the previous month even as listings inched up by 7.8 per cent.

The average benchmark price in Toronto was still up 1.1 per cent month-over-month in July but RBC says that the pace of further price gains are likely to be restrained so long as interest rates remain high.

“The spring tightening in demand-supply conditions is unwinding rapidly in BC and Ontario. Softer sales and increasing new listings returned most markets in these provinces to balance, with Toronto the closest it’s been to a buyer’s market since January,” the report states. “We expect higher interest rates to keep curbing buyers’ enthusiasm for months to come, while possibly forcing the hand of some current owners to sell.”

RBC says that while price appreciation “remains generally brisk,” changes in market conditions have brought “overall demand-supply conditions in Canada back into balance after tightening surprisingly fast this spring.”

In fact, the bank says that a 24 per cent increase in listings that has occurred nationwide since April has now fully reversed the declines seen earlier this year.

Going forward, the bank anticipates that conditions in the real estate market will be “bumpy” but it is not calling for outright price declines at this time.

“We see this summer’s cooling as evidence the surprisingly strong rebound in the spring wasn’t sustainable. Our view had been—and remains—the recovery will be slow until interest rates are cut,” the report states. “What the spring rebound did, though, is bring forward the bottom of price cycle that we earlier anticipated around the fall. With prices rising sooner, the magnitude of the correction turned out to be smaller than expected. We think the resulting higher trough (in level terms) will restrain the pace of future price gains.”

The average selling price of a Toronto home across all property types peaked at $1,334,062 in February 2022 before dropping to a low of $1,037,542 amid what RBC previously called a “historic” housing correction brought about by the Bank of Canada’s aggressive interest rate hiking cycle.

The average selling price in July was $1,118,374, up about 4.2 per cent from one year prior.