Home prices are slipping across plenty of Canada’s main housing markets, continuing a months-long slide and providing a welcome boost to hopeful buyers.
But sales have barely picked up, with early spring buying activity mixed – at best – as buyers remain hesitant about taking the plunge.
Vancouver, for instance, remains “stuck in a low gear” on the housing front, according to Royal Bank of Canada (RBC), while the Toronto and Montreal markets are still taking time to gather momentum.
Despite falling prices, buying a home is still no easy feat for many Canadians. Housing affordability actually worsened in 11 of 13 major markets in February, a Ratehub.ca analysis showed, and fixed interest rate hikes in recent weeks have put the squeeze on buyers.
Another factor isn’t helping: continuing buyer and consumer unease about the economic outlook, which has worsened over the past year amid the sudden arrival of US tariffs and the outbreak of war in Iran.
The US’s flurry of tariff measures against major trading partners has darkened the outlook for the Canadian economy and put plenty of crucial sectors under strain, while the conflict in the Middle East has jolted bond yields and stirred fears of an inflation upswing.
Joel Fox (pictured top), co-founder and chief operating officer of Ownright, told Canadian Mortgage Professional those elements were sapping confidence from the housing market, even if prices are declining.
“Things continue to pop up that impact the market and it’s unpredictable at this point. I think that’s kind of drained people right now and they need some more stability to really feel the confidence that it’s going to bounce back up,” he said.
“It’s just one thing after another. From a market activity standpoint, prices going down is a positive sign traditionally, because you would expect that would drive more buyers into the market. But I think there really is a confidence issue in the real estate market at this point because people have seen it really come pretty close to a grinding halt compared to what we’ve seen historically.”
Homebuyers focus on longer-term trends for certainty
While a fragile ceasefire is currently in place between the US and Iran, doubts have arisen over how long that will last – and Fox said homebuyers will likely need much more certainty on the issue before their confidence returns.
“I think it’d be a bit naïve to think that this Iran situation is resolved at all, and I think that’s kind of just built into people’s expectations,” he said. “They’re kind of numb to the day-to-day announcements and look more at trends.
“It’s certainly a positive thing that there’s a [truce], but even if this gets resolved it’s hard to imagine that something else isn’t going to come down the line that will continue to leave people feeling uncertain.”
Falling prices also dampen housing market confidence
While Toronto sales inched marginally higher in March, that was their first month-over-month increase since September – and the mortgage industry doesn’t appear convinced that marks a more lasting trend.
Fox highlighted another factor at play in the city’s housing market: with prices on a consistent slide, many buyers are likely holding off on a purchase until those declines have levelled off.
“I think a unique thing that’s happening now that we haven’t really seen in a long time is that the price decrease that’s happening is also part of the reason why buyers are still hesitant to jump in,” he said.
“If people are continually seeing that price decrease happening and the volume decrease happening, even if it’s an appealing price compared to what it was two, three or four years ago, it leaves people a little uncertain about what’s to come and afraid that they’re going to step into owning an asset that’s just going to continue to decline in value.”
CMP
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