Canadian home sales were up for the second consecutive month in July, prompting industry watchers to wonder if the market had finally adjusted to the effects of various government policies.

While it’s true that the market appears to be past the worst of its correction, there are still several factors at play that will keep things from returning to the red-hot pace of spring 2017.

For a closer look at the reasons why the market isn’t out of the woods just yet, Livabl has rounded up the latest industry commentary, to keep you in the know.

Interest rate hikes are putting a damper on things

The Canadian housing market has weathered a series of blows this year, including a mortgage stress test which sent sales plunging in January. But there is another factor placing a downward pressure on the market — rising interest rates.

The Bank of Canada hiked the overnight rate to 1.50 basis points in July, and many economists predict it will do so again before the end of the year. According to BMO chief economist Douglas Porter, the fiscal policy is starting to take its toll on the housing market.

“There are growing signs that past rate moves are starting to bite,” he writes, in a recent note.

Those signs include relatively flat prices, which Porter predicts will stay cool for the remainder of the year.

Stricter mortgage rules are still playing a role

Porter also notes that the new mortgage rules are weighing on housing activity, and should continue to do so in the coming months.

“The early return for July home sales suggests that activity is still moderating in much of the country from the 1-2 hit of rising mortgage rates and a tighter regulatory backdrop,” he writes. “While Toronto bucked that trend with an 18% year-over-year rise in sales, this was from very low levels a year ago, and they are still down 30% from two years ago.”

Vancouver is having a particularly hard time

Along with new mortgage rules and higher interest rates, Vancouver is struggling to deal with stricter foreign buyer rules, imposed earlier this year.

TD senior economist Josh Marple notes that the city’s slumping activity isn’t just limited to sales.

“In the GVA, meanwhile…growth in quality-adjusted home prices (the only reported metric) slowed to its softest pace since 2015,” he writes.

Real Estate Board of Greater Vancouver president Phil Moore attributes the sinking prices to a lack of demand.

“With fewer buyers active in today’s market, we’re seeing less upward pressure on home prices across the region,” he writes, in a statement.

According to Moore, demand is softest in the detached home market, but condos are also suffering the effects of a lack of buyer interest.

Meanwhile, the city’s housing supply is starting to creep upwards. There were 12,137 homes on the market in July, up 32% year-over-year.

Think The Canadian Housing Market is Out of The Woods? Maybe Not by Sarah Niedoba | Livabl