The tariff fight with the US is having major repercussions on Canadian confidence and spending. The high uncertainty in an already-vulnerable economy that’s facing political change and coming out of a housing bubble is the perfect storm for trouble. The Bank of Canada has been lowering interest rates and has plenty of ammunition left but the picture is darkening.
Today, the Toronto Regional Real Estate Board reported that sales in February fell 28.5% y/y on a seasonally adjusted basis
Jon Flynn offered a good sense of how poor the data has turned as even non-seasonally adjusted sales fell in February compared to January, which is unheard of and suggests sudden weakness. In the past decade, the average increase from Jan to Feb is 16.4%.
Prices are down about 1.5% y/y but listings are jumping and the investor class has abandoned the sector. I see more trouble coming as listings continue to rise, particularly in the condo market.
The one caveat for now is that February weather was brutal but that was likely to affect new listings more than sales.
“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.
