Canadian home sales plunge 10% in February due to tariff fears

Tariff fears continue to take a bite out of housing market demand, as sales chilled rapidly between January and February, reports the Canadian Real Estate Association (CREA).

A total of 32,195 properties changed hands over the course of the month, down 9.8% month over month, and -10.4% from the same time period last year. According to CREA, that’s the lowest level seen for home sales since November 2023, and the biggest drop in monthly activity since May 2022. 

While sales were down broadly in three quarters of all markets, the declines were the deepest in higher-priced regions such as the Greater Golden Horseshoe and Toronto Areas.

“The moment tariffs were first announced on January 20, a gap opened between home sales recorded this year and last,” said Shaun Cathcart, CREA’s Senior Economist. “This trend continued to widen throughout February, leading to a significant, but hardly surprising, drop in monthly activity. This is already being reflected in renewed price softness, particularly in Ontario’s Greater Golden Horseshoe region.”

Sellers also retreating to the sidelines

Hesitation has also spread to sellers, who are less likely to bring their home to market amid so much uncertainty; the number of new listings dipped 12.7% month over month, undoing some of the surge in inventory that was listed in January. This actually tightened up market conditions somewhat, says CREA, with the sales-to-new listings ratio (SNLR) inching up slightly to 49.9%, up from 48.3% in January. However, this still remains below the long-term average of 55%, and reflects a largely balanced market.

And the influx of homes listed in previous months has helped boost overall supply; there were 4.7 months of inventory, up from 4.1 months at the end of January, and just shy of the long-term average of five months. (According to CREA, a seller’s market would be below 3.6 months and a buyer’s market would be above 6.5 months.)

Home prices are starting to slide

Higher inventory and slower sales were enough to cool price growth with the national average coming in at $668,097, a -3.3% decline from February 2024, and down -4.6% from January. 

That, combined with lower mortgage rates, will be of benefit for the buyers who are participating in the market right now, says James Mabey, CREA Chair.

“The uncertainty of the last few weeks seems to be causing some buyers to think twice about big financial decisions right now, ” he stated in CREA’s release. “For others, a softer pricing environment and now lower interest rates will be a buying opportunity.”

Lower mortgage rates offer buyers an opportunity

It’s a sharp turnaround from the hot early spring market initially anticipated this year. Before tariffs entered the narrative, analysts were largely optimistic about early 2025 home sales as interest rates were dropping, and several new mortgage policies were introduced at the end of the year which improved affordability for first-time buyers and insured mortgage borrowers.

Both of those factors are still at play; we’re now coming off the seventh consecutive rate cut from the Bank of Canada, which brought its benchmark interest rate down to 2.75% – a decrease of 225 basis points from when it first started cutting in June 2024.

As a result, the lowest variable mortgage rate in Canada has dropped to 3.95%, a low not seen since 2022. While the BoC’s rate cut outlook is uncertain, most analysts are expecting we’ll see another two to three quarter point cuts this year, and potentially even deeper if tariffs cause a lot of economic havoc over the long term.

Fixed mortgage rates are also down considerably because bond yields have dropped in recent weeks in response to tariff fears, the lowest at 3.89% for a five-year term – that’s a pretty narrow spread with variable rates, making locking in pretty attractive.

That’s some comfort for those who do need to buy a home this spring season, or are coming up for mortgage renewal – it’s an opportunity to shave up perhaps as much as a percentage off that rate. It’s a much better rate scenario than we saw toward the end of last year.

Overall, however, it’s likely that home sales will remain lower than previously expected in the coming months, as long as tariff fears persist – but of course, as the narrative changes on a daily basis, the outlook remains uncertain; another factor that will keep hesitant buyers on the sidelines.

Also read:

• Bank of Canada cuts target interest rate by 0.25% in March announcement
• How would 25% US tariffs impact Canadian mortgage rates?
• How US tariffs on Canada could impact you
• Tariff uncertainty takes a bite out of Toronto February home sales
• Renewing your mortgage in 2025: Here’s what to expect