Canada’s housing market is “cracking” under the weight of U.S. President Donald Trump’s trade war, with housing resales down in markets across the country, a new report said.
The Royal Bank of Canada report looked at the data from the MLS Home Price Index, which is essentially the median price of a house in a market.
The sharpest pullback in people getting into the housing markets has been in southern Ontario and British Columbia, RBC economist Robert Hogue said.
The pressure from Trump’s trade war is keeping buyers from making a big financial commitment, such as buying a house.
“The trade war is taking an increasing toll on Canada’s housing markets as potential economic fallout weighs heavily on the minds of prospective homebuyers,” Hogue said in his report.
Home prices have been falling and inventories rising as houses go unsold in Vancouver, B.C.’s Fraser Valley and Toronto, putting buyers in the driver’s seat. Other Ontario markets that saw property values decline are Hamilton, Kitchener-Waterloo and Cambridge.
Even previously hot markets are cooling down quickly. Calgary, for example, saw annual home prices decline for the first time in five years.
“Prairie markets such as Edmonton, Saskatoon, Regina, and some in Quebec, including Quebec City, and the Atlantic region like St. John’s seem to be holding up at this point. But they aren’t immune to trade-induced anxiety,” Hogue said in his report.
While buyers are pulling back, people wanting to sell their property continue to trickle steadily into the market.
For example, the number of new listings in Toronto rose by 8.1 per cent but the number of houses being resold plummeted by 23.3 per cent.
Hogue said Toronto’s housing market was in a “downturn.”
“Sales transactions in April were the weakest in 30 years (outside the 2020 COVID-19 lockdown) —making it the second-straight month of exceptionally soft activity,” he said.
The figures were even starker in Calgary, which saw new listings rise by 15.7 per cent but sales dropped by 22.3 per cent.
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The largest drop in home sales came in the Fraser Valley real estate market, with new sales declining by 29.1 per cent.
However, the report noted that there were some signs of stabilization in at least one market. Home resales in Montreal have largely stabilized, down 0.2 per cent since falling nearly 12 per cent in the first two months of the year.
What’s keeping buyers out?
Experts say what’s keeping buyers out is fear of getting hit by Trump’s trade war.
“The buyer hesitation we’re currently seeing is largely psychological,” Penelope Graham, mortgage expert at Ratehub.ca, said.
“Prospective home buyers are fearful that their livelihoods will be affected, and are wary of committing to large financial decisions, such as taking on a mortgage. This is despite some of the most affordable market conditions we’ve seen in some time, as both mortgage rates and home prices have softened this year.”
Trump’s trade war is “clogging the market’s arteries,” said Clay Jarvis, mortgage expert at NerdWallet Canada. He said it’s not just the housing market; even commercial real estate is taking a hit.
“You don’t necessarily want to be expanding your portfolio of rental properties if you think the job market’s going to tank,” he said.
“The cost of living is also a huge factor. If people are struggling to cope with their day-to-day living expenses, or leaning on debt in order to do so, they’re probably not in a position to afford a mortgage.”
What can buyers and sellers do?
For someone looking to buy a house this summer, there are benefits to be had, Jarvis said.
“If you have job security and access to a significant down payment, it’s not a bad time to be looking for a home. Mortgage rates are approachable, and inventory is building in most markets, which should translate to less competition and more room for negotiation,” he said.
Homebuyers can avoid the dreaded bidding wars and insist on having inspections before they commit to a property, given the high inventory in the market, Graham said.
“Those who are serious about buying should seek out a pre-approval and a rate hold as soon as possible, to secure access to today’s mortgage pricing. In today’s economic climate, market sentiment – and the factors that influence mortgage rates – can turn on a dime.”
For sellers, however, the market is a lot tougher.
“With a buildup of inventory in the market, it’s not a competitive time to sell your home. If the timing can’t be avoided, however, it’s important to have realistic expectations in terms of pricing; the heady record-breaking sales of the pandemic years are in the rearview,” she said.
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