Canadian home sales dropped 9.8% as U.S. tariffs stall buyers. Will Thunder Bay’s market feel the impact?
THUNDER BAY – Business – Canada’s housing market took a sharp downturn in February, as new U.S. tariff threats sidelined buyers and created fresh economic uncertainty. Existing home sales dropped 9.8% from January, hitting their lowest level since November 2023, according to the Canadian Real Estate Association (CREA).
Despite dramatic Bank of Canada rate cuts from 5% in June 2024 to 2.75% today, homebuyers remain hesitant amid fears of a trade war with the United States.
Home buyers are likely concerned that the price of a home they are having constructed will face increased costs for construction materials imported from the United States.
Housing Market Faces Broad-Based Decline
CREA reports that declines were felt across most major markets, with the Greater Toronto Area (GTA) and Greater Golden Horseshoe (GGH) experiencing the steepest drops. Benchmark home prices fell 0.8%, and new listings also plunged, reversing the modest growth seen in January.
With sales slowing, the national sales-to-new listings ratio fell to 49.3%, down from the mid-to-high 50s seen in late 2024. A balanced market typically falls between 45% and 65%, meaning conditions are shifting toward a buyer’s market.
Tariff Uncertainty Fuels Economic Anxiety
The downturn in housing is largely attributed to the January 20 announcement by the U.S. of 25% tariffs on Canadian and Mexican goods. Economists had anticipated a strong spring market recovery, but the uncertainty surrounding trade relations with Canada’s largest trading partner has prompted many buyers to pause major financial decisions.
“The moment tariffs were first announced, a gap opened between home sales recorded this year and last. This trend continued to widen throughout February,” said Shaun Cathcart, CREA’s Senior Economist.
The effects of the tariff uncertainty are also being felt beyond real estate. Labour markets are tightening, stocks have suffered losses, and while interest rates are falling, central bank policy will have to balance stimulus with the risk of tariff-induced inflation.
What This Means for Thunder Bay and Northwestern Ontario
The Northwestern Ontario housing market often follows national trends, with local buyers especially sensitive to economic shifts. While interest rate cuts should make homeownership more affordable, uncertainty around trade, jobs, and inflation could keep demand muted.
For local sellers, a softening market may mean longer listing times and more price negotiations. Buyers, on the other hand, could find better deals as the market shifts in their favour.
Looking Ahead: Will Interest Rate Cuts Help?
CREA Chair James Mabey remains cautiously optimistic about the housing outlook, noting that while some buyers are delaying purchases due to economic uncertainty, others may see falling prices and lower interest rates as an opportunity.
“While we continue to anticipate a more active spring for the housing sector, the threat of a trade war with our largest trading partner is a major dark cloud on the horizon,” said Mabey.
With home inventory rising and the Bank of Canada likely to cut rates further, housing affordability could improve. However, if tariff-related economic instability persists, the housing market may continue to struggle in the months ahead.
