Expectations for a market recovery are fading fast as the economy braces for coming shock. When will the outlook improve?
The national housing market appeared poised for a rebound at the beginning of the year in Canada as hopes rose that lower interest rates would nudge homebuyers off the sidelines and see activity heat up by spring. But since then, the threat of a massive shock to the Canadian economy in the shape of US tariffs has emerged – and that rumbling trade war seems to have dashed chances of a housing uptick by the end of the year.
National home sales dived for the fourth month in a row in March, according to the Canadian Real Estate Association (CREA), with sluggish activity and the continuing tariff chaos prompting the association’s most dramatic mid-year forecast change since the global financial meltdown in 2008-09.
Home sales are now expected to remain effectively flat compared with 2024, CREA said, instead of posting a healthy recovery as previously forecast.
There’s little doubt that Donald Trump’s tariff war, which saw the US president slap a minimum 10% levy on imports from scores of countries – and even steeper charges on Canadian products including steel and aluminum – is the main reason for the housing market’s failure to recover so far this year, according to Bank of Montreal (BMO) chief economist Doug Porter (pictured top).
“I think it’s fairly clear that what’s happened here is even in a sector that’s 98% domestic, it can still be affected by consumer confidence, consumer sentiment, and the view on the job market,” he told Canadian Mortgage Professional. “And clearly that’s what’s put a deep chill into much of the market.”
The Bank of Canada warns that a full-blown global trade war could trigger a year-long recession, diminishing Canadians' standard of living. The bank’s new outlooks account for uncertainty in US trade policy.https://t.co/yQxWz5dAhY
— Canadian Mortgage Professional Magazine (@CMPmagazine) April 18, 2025
Ontario feels the pain as trade war gathers pace
Ontario’s housing market has borne the brunt of that trade war – perhaps unsurprisingly, Porter said, because the high concentration of manufacturing, steel and automaking jobs in the province’s economy left it especially exposed to Trump’s tariffs.
Residential sales in Canada’s most populous province plunged by 24.6% last month compared with the same time in 2024, while sales slid 42.5% below the five-year average and 41.4% under the 10-year average for March.
But while the housing market’s immediate prospects might appear grim, there’s still some reason for optimism. “It’s going to take a while for the housing market to get off the floor. We’re essentially looking at a roughly flat performance for sales this year,” Porter said.
“However, we do think gradually we’ll get a bit more clarity on the trade front and I do think buyers will reemerge in the second half of this year as they get a little bit more comfortable in the economic outlook. But it could take some time before buyers regain that confidence.”
Could the bond market act as a check on Trump?
While Trump has doubled down on his tariff policy and shown little sign of taking levies off the table entirely, he’s repeatedly pared back charges against certain Canadian and Mexican imports and also announced a 90-day pause on many tariffs – as well as lowering the “baseline” rate being charged.
That shift arrived as yields for 10- and 30-year US Treasuries soared and stock markets plunged after he launched his trade war on the US’s so-called “Liberation Day.”
But while some took that pullback as proof that Trump had been burned by the bond market, which could act as a check on some of his more impulsive policies, Porter highlighted that the outlook on the trade front remains grave.
That’s because while the president has eased tariffs on some countries, he’s ramped up charges on Chinese imports to the US, which currently face eyewatering levies of 145%, in a spat that’s done nothing to ease the jitters of global financial markets.
“I would argue that the trade war is really in no better a spot than it was a week ago,” Porter said, speaking last Wednesday (April 16), “because it’s just shifted. Now it’s mostly on China. We’re talking about the two largest economies in the world just going at it, hammer and tong. This is really serious stuff.”
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