Canadian Housing Report: Optimism Amid Economic and Political Uncertainty

Quebec, QC

Written by Breck Hapner

Editor’s note: Welcome to the HAVEN State of the Canadian Housing Market series. Every month, we will share an update explaining details and projections related to Canada’s real estate sector to keep you informed.

Canada’s real estate market experienced a notable slump in December, according to the Canadian Real Estate Association’s (CREA) January 15th Monthly Housing Market Report. National home sales dropped nearly 6% from November, marking the sharpest month-over-month (MoM) decline for December in over 11 years. This steep drop highlights ongoing market challenges, with seasonal factors, limited supply, and economic uncertainty influencing buyer behavior. While CREA remains optimistic about a rebound in the coming months, these figures underscore the hurdles facing the market as it transitions into 2025, including economic pressures brought by the new Trump administration.

Seasonal Decline Highlights Fragile Market Recovery

According to the CREA report, home sales across Canadian MLS Systems fell 5.8% in December 2024 compared to November. Despite this monthly decrease, sales remained 13% higher than in May 2024, just before the Bank of Canada’s (BoC) initial interest rate reduction in early June. The fourth quarter of 2024 saw a 10% increase in sales over the third quarter, making it one of the most active quarters in the past two decades, excluding the pandemic period.

While December’s decline reflects a typical seasonal slowdown, it also underscores the fragility of the market’s recovery. While this dip may not be alarming on its own, it signals continued volatility, where even modest economic shifts or changes in consumer sentiment can have noticeable effects. Although BoC rate cuts have reactivated buyer interest, the market’s responsiveness to these cuts suggests a dependence on favorable monetary policy—leaving it vulnerable to future economic shifts, such as inflationary pressures or trade disruptions brought by tariffs.

Shaun Cathcart, CREA’s Senior Economist, noted in CREA’s video, Fourth Quarter Housing Data Hints at Home Sales Rebound for 2025 that, “The number of homes sold across Canada declined in December compared to a stronger October and November, although that was likely more of a supply story than a demand story.” He anticipates a significant surge in demand in spring 2025, driven by expected lower interest rates and an influx of new listings.

Vancouver, BC

Tightening Inventory Fuels Competition and Exposes Regional Disparities

According to CREA, December 2024 saw a 1.7% MoM decrease in newly listed properties, marking the third consecutive monthly decline following a substantial increase in new supply in September. This reduction contributed to tightening inventory levels.

The persistent inventory shortfall highlights structural challenges in the housing market, particularly in regions with high population growth and strong demand. For prospective buyers—especially first-time homeowners—reduced inventory exacerbates competition, driving up prices and potentially leading to bidding wars. This dynamic disproportionately impacts middle- and lower-income Canadians, who already face significant barriers to homeownership.

For sellers, reduced inventory may seem advantageous in terms of pricing, but it also limits options for those looking to sell and subsequently buy, creating a cyclical stagnation that further constrains supply.

By the end of 2024, 128,000 properties were listed for sale on Canadian MLS Systems—a 7.8% YoY increase but still below the long-term average of approximately 150,000 listings. The national sales-to-new-listings ratio eased to 56.9% in December, down from 59.3% in November, remaining close to the long-term average of 55%, indicative of balanced market conditions.

However, this broad statistic masks significant regional disparities. In high-demand urban centers such as Toronto and Vancouver, inventory constraints continue to favor sellers. Conversely, in less competitive markets, buyers may find slightly more favorable conditions—though these opportunities remain far from uniform. Without coordinated efforts to tackle these structural supply issues, the Canadian housing market risks perpetuating affordability challenges and limiting access to homeownership.

Home Prices Stabilize, but Affordability Challenges Persist

According to the CREA report, the MLS Home Price Index (HPI) rose 0.3% from November to December 2024, marking the second consecutive month of increase. Year-over-year (YoY), the HPI was down just 0.2%, the smallest decline since April 2024. Meanwhile, the actual (not seasonally adjusted) national average home price in December 2024 was $676,640, reflecting a 2.5% YoY increase.

While this suggests a stabilizing trend, national averages mask regional variations. Some markets are experiencing stronger price growth, while others remain stagnant or even see declines due to persistent affordability challenges.

As interest rates decline and demand rises, home prices are likely to continue increasing—making it even more difficult for first-time buyers to enter the market, particularly in regions like Toronto and Vancouver. While rising property values may boost home equity for current owners, they also increase down payment requirements and monthly mortgage costs—even at lower interest rates—potentially discouraging sellers and further constraining inventory.

Toronto, ON

Balancing Optimism with Uncertainty: Affordability, Supply Challenges, and Economic Risks Shape Housing Outlook

January 15th Global News report emphasized that December’s home sales slump wasn’t solely a seasonal trend; it also reflected deeper issues of constrained inventory and affordability concerns. As inventory tightened, competition among buyers intensified, raising concerns about future home price increases. In urban centers, high borrowing costs and elevated home prices continued to push first-time buyers to the sidelines.

While CREA remains optimistic, progress hinges on Canada’s structural affordability challenges. The market outlook remains clouded by uncertainty surrounding tariffs implemented by U.S. president Donald Trump. According to TD Bank economist Rishi Sondhi, rising home prices and sales are projected, but the macroeconomic environment is unpredictable. “These numbers could be very different, not so long from now,” Sondhi told Global News.

However, a January 15th Financial Post article states that fourth-quarter housing data “hints at [a] home sales rebound for 2025;” that lower interest rates and renewed buyer confidence drove a resurgence in market activity across many regions. Long-term growth will require strategic interventions to address persistent issues, including supply constraints and rising home prices, but the outlook is generally positive: “While housing market activity may take a breather over the winter with fewer properties for sale, the fall market rebound serves as a good preview of what could happen this spring,” James Mabey, CREA Chair told the Financial Post.

Confidence vs. Reality: Is Now the Time to Buy in Canada’s Evolving Housing Market?

Does CREA’s optimism align with reality? A January 15th Yahoo! Finance article cited Royal LePage’s latest house price survey, which reported that, “home prices rose 3.8% in Q4 as [the] sluggish market starts to pick up.” This revival was driven by lower interest rates, regulatory adjustments, and renewed demand among buyers, particularly in higher-priced segments, which saw a 40.5% YoY increase.

Despite this positive outlook, affordability remains a significant concern. Phil Soper, president and CEO of Royal LePage, emphasized that BoC interest rate cuts and mortgage rule adjustments are “revitalizing Canada’s real estate market and making home ownership more attainable,” and according to a January 14th Royal LePage article, these changes could reduce monthly payments for certain buyers, improving affordability.

These factors suggest that the Canadian housing market may surge in spring 2025—but should December’s slump be a reason to delay purchasing? Not necessarily. A December 27th Financial Post article advises potential buyers to act now. With Canada’s home prices expected to rise 10% in 2025, increasing demand from immigration, and generally lower mortgage rates, the article argues: “If you are considering buying, it is time to get busy. Today is an opportunity that will look cheap a year from now.”

Montreal, QC

Economic Uncertainty and Tariffs: Ripple Effects on Canada's Housing Market

January 20th Financial Post article discusses the possibility of U.S. President Trump imposing a 25% tariff on Canadian imports, potentially introducing significant economic uncertainty for Canada as it approaches 2025. On February 1st, the Trump administration activated tariffs on Canadian goods. Given the deep integration of the U.S. and Canadian economies, such tariffs could disrupt supply chains, increase consumer costs, and strain the longstanding trade relationship. In response, Canadian officials are currently exploring strategies to mitigate these impacts. This development adds a layer of complexity to Canada’s economic outlook, which, according to CREA, has been showing signs of recovery in the housing market and other areas. The impact of tariffs on commodities would likely adversely affect low- to middle-income Canadians, as “Everything that gets put on the table is likely to go up,” Fen Osler Hampson, professor of international affairs at Carleton University and co-chair of the Expert Group on Canada-U.S. Relations, shared with the Financial Post.

Trump’s implementation of tariffs could introduce significant uncertainties for Canada’s housing market, as outlined in a January 23rd GTA Homes article. The construction industry, heavily reliant on imported materials like lumber and steel, may face increased costs due to these tariffs. Such cost escalations could lead to higher expenses for builders, potentially resulting in increased home prices for consumers. Additionally, the tariffs might disrupt supply chains, causing delays in construction projects and affecting housing availability. “Thus, negative ripple effects can be expected throughout the Canadian economy, leading to lower profits, less spending, and job losses. This, in turn, will mean that many more Canadians will struggle to afford housing.”

Geopolitical Tensions and Political Instability: The Impact on Canada’s Housing Market

Beyond tariffs, a January 21st Financial Post article examines the pros and cons of Trump’s assertion that he could use economic force to pressure Canada into becoming the 51st U.S. state. Such rhetoric, paired with aggressive trade policies, threatens to destabilize investor confidence and erode economic security in Canada, a nation heavily reliant on cross-border trade with the United States. On a broader scale, such threats could undermine consumer confidence in Canada’s economy, leading to hesitancy among prospective homebuyers and slowing market activity. For those already navigating the challenges of high prices and limited inventory, this geopolitical tension could further dampen demand and stifle recovery efforts in the housing market.

Meanwhile, Canadian Prime Minister Justin Trudeau’s resignation has compounded political and economic instability. A January 7th USC Dornsife article explained that Trudeau’s departure has been attributed to a confluence of domestic challenges and external pressures, notably from the United States. Domestically, Trudeau faced declining popularity and internal party conflicts, exacerbated by Trump’s pressure on Canada. The article stated, “The Canadian economy isn’t in good shape, and a 25% tariff—as envisioned by Trump—would be disastrous. Canadians are looking for someone who can negotiate with Trump from a position of strength, and that doesn’t appear to be Trudeau.” This political instability, along with intensified U.S. economic pressure, could undermine investor confidence in housing development, further constraining supply, and posing challenges for prospective homeowners and the broader Canadian economy.

Kamloops, BC

CREA’s Forecast: Optimism or Overreach Amid Economic Uncertainty?

CREA presents an optimistic outlook for Canada’s housing market, projecting rising home sales and prices into 2025. However, given the broader political and economic environment, it fails to take into account the challenges posed by potential tariff-driven supply shortages and escalating costs which may affect real estate. Whether the Canadian housing market experiences the release of pent-up demand CREA forecasts or falls prey to economic implications brought on by external forces is currently unknown, or as Cathcart told Global News, “with no clarity yet on how trade disputes would resolve, CREA’s current forecasts are intentionally conservative.”

In our next article, HAVEN will take a further look at the numbers: how Canada’s housing market is reacting to prevailing economic factors influencing real estate.