Canada’s housing market
showed signs of life in May when sales rose for the first time in about six months, leading some to hope the long-awaited turnaround had finally arrived.
But some economists are warning this “breather” will be short-lived and the housing downturn will continue through the year.
“Unless an immediate deal is reached to remove most
U.S.-Canada tariffs
, we expect the housing slump will extend through the end of 2025,” wrote Tony Stillo, director of Canada economics for Oxford Economics and Michael Davenport, senior economist.
The housing market remains weak, they argue. National sales in May, though up from the month before, were still about 16 per cent below the five-year average and the MLS benchmark price slid lower for the sixth month in a row, down 3.2 per cent year over year.
The
Bank of Canada
delivered some serious borrowing relief to Canadians over the past year, cutting its benchmark interest rate from 5 to 2.75 per cent. But the expected rally in the housing market never materialized because U.S. President
Donald Trump
started a tariff war.
Stillo and Davenport said Trump’s trade assault threatens to deepen Canada’s housing market downturn as buyers and sellers remain “paralyzed” by uncertainty.
“Poor affordability, weak confidence, and job losses from the recession now likely underway, on top of headwinds from a shrinking population, will continue to weigh on demand,” they said.
They expect home prices to fall a cumulative 8 to 10 per cent by the end of the year as distressed home sales rise, pushing up supply.
Whether they are right or not remains to be seen, but June data from regional real estate boards, now starting to come out, doesn’t look as upbeat as May.
Yesterday Calgary, the first of the boards to report, said home sales dropped 16.5 per cent last month from the year before as new listings rose. The city’s inventory reached 6,941 homes for sale, up 83.2 per cent from last year.
Early data from digital realtor Wahi.com also points to a “less-than-festive June” for the Greater Toronto Area, said
MortgageLogic.news strategist Robert McLister
.
Sales were down over 12 per cent from last year, and prices dropped 1.5 per cent from the month before. Total active listings were up almost 35 per cent from last year.
Chances of more
mortgage rate relief
reviving the market are also dimming.
Oxford Economics expects the Bank of Canada to keep its policy rate steady at 2.75 per cent for “the foreseeable future,” while rising government bond yields push up fixed mortgage rates.
It expects the five-year mortgage rate to rise from 5.1 per cent in the second quarter to 5.5 per cent by the end of the year.
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When it comes to tourists in Canada, Americans top the charts. U.S. visitors accounted for four out of five non-resident trips in 2024, spending a record $15 billion, more than all other nations combined, says
a report by TD Economics.
Yet their numbers are down this year as trade tensions, economic uncertainty and a weak U.S. dollar keep more Americans away. U.S. resident car trips to Canada were down 8.4 per cent in May, the fourth month in a row of declines.
TD Economics estimates that U.S. spending in Canada will drop 5 to 10 per cent this year, a loss of about $1 billion.
International travellers from other countries are picking up some of the slack. Visits from the United Kingdom rose by 14 per cent and visits from Mexico were up by 22 per cent in April. In May travellers from China increased 11 per cent from the year before.
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Is real estate really the best place to park your money? Mortgage strategist Robert McLister takes a hard look at the numbers and reaches some surprising conclusions.
Read on
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McLister on mortgages
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Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.
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Posthaste: Canada home prices seen falling further as tariff war deepens downturn
2025-07-03 12:01:50
