Uncertainty around tariffs and a potential trade war with the United States were the likely culprits behind home sales falling off during the last week of January, according to the Canadian Real Estate Association (CREA). That weakness pushed national sales down 3.3 per cent compared to December, CREA said in its latest housing report.

At the same time, newly listed properties jumped 11 per cent month-over-month in January — uncommon for the typically slow winter season — reflecting “the largest seasonally adjusted monthly increase in new supply on record going back to the late 1980s,” the report said, aside from swings during the COVID-19 pandemic.

“The timing of that change in demand leaves little doubt as to the cause — uncertainty around tariffs,” CREA senior economist Shaun Cathcart said in a release. “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.”

The non-seasonally adjusted national average home price increased just 1.1 per cent year-over-year to $670,064 in January. CREA says the National Composite MLS Home Price Index has “barely budged” in the last year due to “ongoing softness” in Ontario and British Columbia — though that’s been offset by rising prices in Quebec, the Prairies and the East Coast.

B.C. and Ontario are still the most expensive provinces to buy a home, but average residential prices were down 3.8 per cent in B.C. and 6.2 per cent in Ontario month-over-month in January. Meanwhile, prices were up 7.3 per cent in Quebec. The Prairies had more modest price increases, at 0.4 per cent in Alberta, 0.7 per cent in Saskatchewan and 0.3 per cent in Manitoba. Among the Atlantic provinces, Newfoundland had the highest month-over-month price increase at 5.8 per cent in January.

CREA says inventory is currently in a sweet spot between a buyer’s market and a seller’s market, with 4.2 months of inventory on a national basis at the end of January 2025. The long-term average is five months of inventory.

“Based on one standard deviation above and below that long-term average, a seller’s market would be below 3.6 months and a buyer’s market would be above 6.5 months,” the report said.

The drop in sales and surge in new supply caused the national sales-to-new listings ratio to fall to 49.3 per cent, which CREA says is on the lower end of readings consistent with balanced housing market conditions (between 45 per cent and 65 per cent).

Properties listed for sale across all Canadian MLS systems were up 12.7 per cent year-over-year, with nearly 136,000 listings in January. However, CREA says that’s still below the long-term average of 160,000 listings for this time of the year.

While CREA chair James Mabey expects real estate activity to pick up in the spring, he said in a release that the threat of a trade war with Canada’s largest trading partner is “a major dark cloud on the horizon” for the real estate sector as the effects ripple throughout the economy.

However, lower prices and lower interest rates could be a boon for some buyers. The Bank of Canada cut its policy interest rate by 25 basis points to three per cent in its first rate announcement of 2025 on Jan. 29 and is expected to continue with gradual cuts in 2025.

“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,” said Mabey.

• Email: jswitzer@postmedia.com

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