Canadian home sales – The Canadian housing market took a hit in February 2025 as homebuyers hesitated due to economic uncertainties surrounding ongoing trade tensions between Canada and the United States. According to the latest report from the Canadian Real Estate Association (CREA), national home sales declined significantly, marking one of the largest drops in recent years.
This downturn in market activity reflects the impact of global economic trends on local real estate, particularly in major regions like Toronto and the Greater Golden Horseshoe. However, while sales volume declined, market conditions remain relatively balanced, and inventory levels are gradually improving—offering potential opportunities for buyers seeking better deals.
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In this blog, we will explore the factors behind the sales decline, analyze market conditions, and assess what this means for buyers, sellers, and investors in the Canadian real estate market.
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Home Sales See Largest Drop Since 2022
The February housing market report revealed that home sales dropped by 9.8% compared to January 2025. This marks the largest single-month decline since May 2022. Furthermore, February 2025 recorded the lowest number of transactions since November 2023, underscoring a clear slowdown in buyer activity.
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This decrease wasn’t isolated to just a few provinces—sales declined in roughly three-quarters of all local real estate markets. The most significant impact was seen in Ontario, particularly in the Greater Toronto Area (GTA) and the surrounding Greater Golden Horseshoe region. Given that these regions are key drivers of Canada’s real estate market, a slowdown here has broad implications nationwide.
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What’s Behind the Sales Decline?
Several factors contributed to the February market slowdown:
Trade War Concerns and Economic Uncertainty
The ongoing trade dispute between Canada and the U.S. created uncertainty, making many potential buyers hesitant to make large financial commitments. Tariffs imposed on key industries have raised concerns about economic stability, affecting consumer confidence.Higher Interest Rates Over the Past Year
While interest rates have recently started to decline, the elevated rates throughout 2024 made borrowing more expensive. Many buyers are still adjusting to these financing costs, leading to cautious market behavior.Seasonal Market Trends
Historically, winter months tend to see reduced real estate activity compared to the spring and summer seasons. However, the February 2025 decline was larger than expected, suggesting that external economic factors are playing a major role.Buyer Uncertainty Over Home Prices
With home prices starting to soften in some regions, prospective buyers may be waiting to see if prices drop further before making a purchase.
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Market Conditions Remain Balanced
Despite the significant decline in sales, market conditions remain balanced, thanks to a parallel drop in new listings. The national sales-to-new listings ratio in February was 49.9%, up slightly from January’s 48.3%. Historically, a balanced market is defined by a ratio between 45% and 65%, meaning the current market remains within that range.
This indicates that while fewer transactions are occurring, neither buyers nor sellers have a distinct advantage. Inventory levels are gradually increasing, providing more choices for buyers, but the supply remains below long-term averages.
Total listings on MLS® Systems: 146,250 (up 13.1% year-over-year but still below the typical 174,000 listings for this time of year).
Months of inventory available: 4.7 months (compared to 4.1 months in January).
Long-term average months of inventory: 5 months.
These numbers suggest that while buyers may see more choices in the market, the overall supply is still catching up to long-term norms.
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Home Prices Show Signs of Softening
The National Composite MLS® Home Price Index (HPI) declined by 0.8% between January and February 2025. This drop was most pronounced in Ontario’s Greater Golden Horseshoe region, where prices softened the most.
On an annual basis, the non-seasonally adjusted National Composite MLS® HPI was down by 1% compared to February 2024. While this decline is not dramatic, it signals a cooling trend, particularly in areas that previously saw rapid price growth.
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What This Means for Buyers and Sellers
For Buyers: The softening market and growing inventory levels may present opportunities for those looking to purchase. With interest rates stabilizing and less competition among buyers, negotiating power is improving.
For Sellers: Those planning to sell their homes may need to adjust their expectations and pricing strategies. Proper staging, competitive pricing, and strong marketing efforts will be key to attracting buyers in a slower market.
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Regional Market Breakdown
While the overall national market saw declines, different regions experienced varying degrees of impact.
Greater Toronto Area (GTA):
The GTA saw one of the steepest declines in sales, aligning with a slowdown across Ontario. Home prices also saw more significant softening in this region.Vancouver and British Columbia:
While Vancouver’s market experienced some declines, it remained relatively stable compared to Ontario. The demand for housing in key BC cities continues to be influenced by strong immigration and economic activity.Prairie Provinces (Alberta, Saskatchewan, Manitoba):
The impact was less pronounced in these regions, as affordability remains better than in Ontario and BC. Some cities in Alberta even saw stable or slightly increasing activity.Atlantic Canada:
While home sales in Atlantic Canada were not immune to the national trend, demand remains strong due to continued interest from out-of-province buyers.
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Looking Ahead: What to Expect in the Coming Months
With the spring market approaching, many are wondering if the downward trend in sales will continue or if activity will rebound. Several factors will play a role in shaping the market in the coming months:
Interest Rate Adjustments:
If mortgage rates continue to ease, buyer confidence may return, leading to increased activity.Tariff and Trade Negotiations:
Any positive developments in the Canada-U.S. trade situation could help restore consumer confidence.Seasonal Market Trends:
Spring is traditionally a more active season for real estate. If economic conditions stabilize, we may see a pick-up in sales activity.
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Conclusion: A Shifting Market with New Opportunities
February 2025 marked a significant slowdown in Canadian home sales, primarily due to economic uncertainty surrounding tariffs and trade policies. However, despite the decline in transactions, the market remains relatively balanced, with increasing inventory offering potential opportunities for buyers.
While home prices have softened, they have not collapsed, suggesting a measured cooling rather than a dramatic downturn. As we move into the spring season, prospective buyers and sellers should stay informed about market trends and act strategically to make the most of current conditions.
For those looking to buy or sell real estate in Canada, now is a critical time to work with experienced professionals who can provide expert guidance on navigating this evolving market.
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