Tariff uncertainty takes a bite out of February Toronto home sales

Growing economic uncertainty has left its mark on the Greater Toronto Area housing market, as buyers and sellers retreated to the sidelines in February.

According to the latest data from the Toronto Regional Real Estate Board, a total of 4,037 properties changed hands over the course of the month, a decrease of -27.4% when compared to the same time period in 2024. Sales ticked up by 4.9% from last month, though activity is clearly slowing down when compared to the almost 15% increase recorded between December and January.

“On top of lingering affordability concerns, homebuyers have arguably become less confident in the economy. Uncertainty about our trade relationship with the United States has likely prompted some households to take a wait-and-see attitude towards buying a home. If trade uncertainty is alleviated and borrowing costs continue to trend lower, we could see much stronger home sales activity in the second half of this year,” said TRREB Chief Market Analyst Jason Mercer.

Sellers hold off on listing amid tariff fears

Tariff uncertainty also influenced sellers; while the GTA market remains well-supplied, the pace at which new homes are coming to market is starting to slow. A total of 12,066 properties were listed in February, up 5.4% year over year, but down -2.6% on a monthly basis. Overall, a total of 19,536 homes are available for sale in the region – an increase of 2,379 more than in January.

Year-over-year home prices starting to slip

Ample supply and soft buyer activity had a chilling effect on prices, with the average now down on an annual basis at $1,084,54, a decrease of -2.2% compared to last year, though still up over the short term by 4.1%. The MLS Home Price Index, which reflects the most typical type of home sold with the upper and lower extremes removed, also fell by 1.8% year over year.

Despite these slight price drops, homes in the GTA remain largely unaffordable for many would-be buyers, exacerbated further by high interest rates, says TRREB President Elechia Barry-Sproule.

"Many households in the GTA are eager to purchase a home, but current mortgage rates make it difficult for the average household to comfortably afford monthly payments on a typical property. Fortunately, we anticipate a decline in borrowing costs in the coming months, which should improve affordability," he stated in the board’s release.

Lower rates could boost demand

Mortgage rates have been steadily falling since June 2024, when the Bank of Canada kicked off a rate-cutting cycle in response to lowering inflation. The central bank has since reduced its trend-setting overnight lending rate – which lenders use to set their prime rates and variable mortgage rate pricing – a total of six times since, bringing it from a peak of 5% to 3% today.

It’s largely expected that the BoC is poised to cut its rate by another quarter of a percentage in its upcoming announcement on March 12. However, the path forward for interest rates will largely depend on whether threatened US blanket tariffs will be implemented and if so, how long they last for; the BoC will need to dole out stimulus in the form of lower rates if tariffs wreack long-term damage on the Canadian economy.

Should borrowing costs plunge further, that could help incentive home buyers back into the market – but perhaps less so if an accompanying recession chops purchasing power and livelihoods. Both the central bank and real estate boards will be looking closely at how trade policy evolves in the coming weeks, and its effect on consumer demand, markets, and real estate.

Also read:

• Bank of Canada cuts target interest rate by 0.25% in January 2025 announcement
• Rising prices made it tougher to afford a home across Canada in January
• How US tariffs on Canada could impact you
• How could 25% US tariffs impact Canadian mortgage rates?
• Renewing your mortgage in 2025? Here’s what to expect