Trade war chills strongest housing market in 3 years

Canada's housing market, which had been showing signs of strength, is now experiencing a significant downturn due to escalating trade tensions with the United States. In February, national home sales dropped nearly 10% from January, marking the most substantial monthly decline since May 2022. This decrease reflects growing economic uncertainty as potential buyers hesitate to make significant financial commitments amid the trade conflict.

The downturn was widespread, with approximately three-quarters of local markets, including major urban centers, experiencing declines. Toronto and the surrounding Golden Horseshoe region were notably affected. New property listings also fell sharply by 12.7% month-over-month, reversing the unexpected surge seen in January. This reduction in both sales and listings indicates a market grappling with uncertainty.

The trade conflict's impact is evident in the behavior of both buyers and sellers. The uncertainty has led many to pause their real estate plans, resulting in decreased market activity. This hesitation is further reflected in the national sales-to-new-listings ratio, which, despite the declines, ticked up slightly to 49.9% from 48.3%, suggesting a market in balance but under strain.

In the Greater Toronto Area, home resales plummeted 29% from January, reaching a new cycle low. This significant drop raises concerns about the market's ability to sustain its recovery. The increased supply, coupled with reduced demand, has shifted bargaining power to buyers, leading to a 1.5% decrease in Toronto's composite MLS Home Price Index from January to February.

Similarly, Vancouver's housing market faced a setback, with home resales falling more than 15% from January. This decline reversed the progress made over the past six months. The renewed downward pressure on prices saw the Vancouver-area MLS Home Price Index slip 1.1% from a year ago in February, with the condo segment experiencing a 2.8% decrease.

As the trade war persists, the Canadian housing market remains vulnerable to further fluctuations. The ongoing economic uncertainty is likely to continue influencing buyer and seller behavior, potentially leading to prolonged periods of reduced activity and price adjustments across various regions. Market participants and policymakers will need to monitor these developments closely to navigate the challenges ahead.