Canadian real estate sales drop in January due to tariff fears

It’s been a sluggish start to the year for Canadian real estate sales, as concerns over US tariff threats chill previous expectations of a hot January market.

According to the Canadian Real Estate Association (CREA), the number of transactions fell 3.3% between December and January, though inching up 2.9% compared to the same time period in 2024. A total of 26,650 homes traded hands over the course of the month. However, according to CREA’s analysts, the drop in sales was more pronounced towards the end of January, coinciding with the news of the growing trade threat.

“Big jump” in supply offers buyers choice

The other standout development was a surge of new supply coming onto the market; sellers brought a total of 83,450 homes for sale online, marking an 11% jump from December, and a considerable 22.7% year-over-year increase. According to CREA, aside from the “wild swings seen during the pandemic,” this marks the largest month-over-month increase of new supply since the late 1980’s.

“The standout trends to begin the year were a big jump in new supply at an uncommon time of year, as well as a weakening in sales which only showed up around the last week of January,” said Shaun Cathcart, CREA’s Senior Economist. “The timing of that change in demand leaves little doubt as to the cause – uncertainty around tariffs. Together with  higher supply, this means markets that had been steadily tightening up since last fall are now suddenly in a softer pricing situation again, particularly in British Columbia and Ontario.”

Home prices remain flat

Slowing sales and rising inventory has kept a lid on price growth, with the national average inching up just 1.1% on an annual basis, to $670,064. The MLS Home Price Index, which measures the most typical type of home sold with the high and low extremes split out, was essentially flat at -0.08% month over month, and 0.7% year over year.

“In fact,” states CREA’s release, “the National Composite MLS® HPI has barely budged in the last year, owing to ongoing softness in B.C. and Ontario, which has been offsetting rising prices on the Prairies, in Quebec, and across the East Coast.”

Canadian real estate market remains balanced

Those who are currently active on the market will enjoy slightly more buyer-friendly conditions as the sales-to-new-listings ratio (SNLR) dropped to 49.3%, compared to its range in the mid-to-high 50s late last year. This is also below the long term average of 55%; according to CREA, a ratio between 45% and 65% indicates a balanced housing market in terms of supply and demand, with above and below that threshold signalling sellers’ and buyers’ markets, respectively.

CREA reports there were nearly 136,000 properties listed for sale on all Canadian MLS Systems at the end of January 2025, an increase of 12.7% from 2024, but still below the long-term average for that time of the year of around 160,000 listings. In terms of months of inventory – the amount of time it would take to fully sell off all available homes for sale – supply sits at 4.2, an increase of the “high threes” that defined the market in the last three months of 2024, though below the long-term average of five months.

Trade uncertainty to dictate the market

Before US President Donald Trump’s initial utterance of tariff threats, real estate analysts had expected a robust late winter and spring housing market, as lower interest rates improved affordability.

While interest rates are still likely to fall further – the Bank of Canada is currently expected to cut its benchmark rate at least twice more, and perhaps by a larger margin if tariffs do indeed take hold – fears of a recession are making some buyers think twice about jumping into the market. 

“While we continue to anticipate a more active spring for the housing sector, the threat of a trade war with our largest trading partner is a major dark cloud on the horizon,” said James Mabey, CREA Chair. “While uncertainty about the economy and jobs will no doubt keep some prospective buyers on the sidelines, a softer pricing environment alongside lower interest rates will be an opportunity for others.

Also read:

• GTA home sales up 15% between December and January
• How could 25% US tariffs impact Canadian mortgage rates?
• How US tariffs on Canada could impact you
• 2024 marked transitionary year for GTA real estate
• Bank of Canada cuts target interest rate by 0.25% in January 2025 announcement
• Lower rates improved affordability across Canada in 2024