Don’t miss out—join us online for REM’s first monthly market breakdown on March 25 at 2 PM Eastern. REM, columnist Daniel Foch will analyze CREA’s latest stats, market slowdowns, and what shifting buyer sentiment means for Realtors. Register here.

 

 

It seems Canada’s resilient housing market is finally meeting a storm it can’t immediately weather. In CREA’s February 2025 data, we saw home sales plunge dramatically—almost as if the market collectively paused to reflect. 

Is this surprising? Not really. It’s a reaction many predicted as the trade war with the United States continues to escalate, throwing economic certainties into question. We’ve been talking about this since Trump’s election victory in November.

 

Canadian homebuyers: Wait-and-see or panic mode?

 

A nearly 10 per cent drop in home sales month-over-month isn’t merely a statistic—it’s a loud, clear message that homebuyers are hitting pause. And they’re doing so at what is historically one of the busiest times of the year—the onset of the spring market. Ever since tariffs and related threats made their unwelcome debut, potential homeowners across the nation seem content to observe from the sidelines. Shaun Cathcart, CREA’s senior economist, described this reaction as “hardly surprising.” But should buyers be concerned, or is this caution prudent?

Ontario’s Greater Golden Horseshoe region, including Toronto, felt this pinch sharply. Usually a vibrant pulse point of market activity, this area’s decline is not just worrying—it symbolizes the broader uncertainty gripping Canada’s urban markets.

 

 

Prices cooling: Is this the beginning of a correction?

With fewer transactions occurring, the predictable domino effect on pricing has begun. A 0.8 per cent month-over-month decline in the HPI might seem minor at first glance, but let’s not overlook its significance: it’s the sharpest monthly dip since December 2023. 

Even more revealing is the 1 per cent year-over-year decrease in the HPI, combined with a notable 3.3 per cent year-over-year drop in the actual (not seasonally adjusted) national average sale price. This significant downward shift indicates not merely a gentle market cool-down, but possibly the first tremors of a deeper correction in Canadian real estate.

Some market optimists might view lower average prices as a much-needed reprieve from the rapid price escalation of previous years, offering affordability breathing room. However, it would be unwise to view this as purely good news. Price drops prompted by widespread caution and economic unease rarely stay neatly confined—they can quickly spill over into broader market disruptions. 

The silver lining is that yes, people are more likely to buy more homes if they can afford them—and yes, lower prices make homes more affordable. With that being said, people are less likely to buy homes if they’re afraid they’ll lose a job, a business, or an investment—and those recessionary fears seem to be more present now than ever for Canada. 

 

Listings dropped, but not enough

 

It would appear that buyers aren’t the only ones hitting pause. Sellers seem to be adopting a “wait and see” approach as well. February also saw a dramatic reversal in the number of homes listed, dropping by 12.7 per cent and negating the unusual spike we witnessed in January. 

You’d think fewer listings would tighten the market, yet sales also fell, maintaining an oddly balanced state. The sales-to-new listings ratio crept up slightly to 49.9 per cent, comfortably within the “balanced” range. Yet, it’s a fragile equilibrium, easily disrupted if buyers or sellers decide they’ve had enough.

 

 

Fear of the unknown

 

A rising inventory—from 4.1 to 4.7 months—would typically signal more choice and less urgency. But there’s an uncomfortable undertone here. Buyers aren’t enthusiastically choosing to wait; they’re hesitantly stepping back. A healthy market has active participants eager to buy and sell. What we’re seeing instead is hesitation, reflecting growing uncertainty about the economic outlook.

CREA Chair James Mabey acknowledges the psychological impact of recent events, “The uncertainty of the last few weeks seems to be causing some buyers to think twice about big financial decisions right now,”

 It’s not purely economics driving decisions anymore; it’s psychology. Every headline about the escalating Canada-U.S. trade war chips away at consumer confidence, leaving buyers hesitant to commit, fearful that today’s tensions could be tomorrow’s economic crisis.

 

Navigating uncertainty

 

The truth is, no one knows exactly how long the trade war’s shadow will hang over Canada’s real estate market. Short-term volatility looks unavoidable. The market feels like it’s at a tipping point—one strong gust of economic news could tip it sharply in either direction.

Brace yourselves for what is to come; it could be a bumpy ride.

Though, to be fair, we’re pretty used to that—after what looked like a glimmer of hope for monthly home sales, we’re back firmly below the 10-year average.