Toronto-area home sales plummeted in February and new listings jumped as buyers remain on the sidelines amid the U.S. trade war.
Sales in the GTA dropped by more than 27 per cent year over year and new listings increased by 5.4 per cent. The slow sales and increasing supply resulted in active listings surging by 76 per cent in February compared to the same time last year, according to the Toronto Regional Real Estate Board’s (TRREB) February report.
“On top of lingering affordability concerns, homebuyers have arguably become less confident in the economy,” TRREB chief market analyst Jason Mercer said in the report.
“Uncertainty about our trade relationship with the United States has likely prompted some households to take a wait-and-see attitude toward 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.”
The sales-to-new-listings ratio is now 33 per cent, indicating a buyers’ market — meaning buyers have more choice and negotiating power.
The average sales price in February was $1.08 million, a 2.2 per cent decline from February last year.
Sales dropped significantly for all housing types with detached, semi-detached, townhomes and condos seeing year over year decreases of 31 per cent, 22 per cent, 30 per cent and 22 per cent, respectively.
Despite this, prices for housing remained relatively flat with semi-detached, townhomes and condos seeing a year-over-year drop of four per cent, 2.3 per cent and 1.3 per cent drop, respectively. Detached homes saw a marginal increase of 0.2 per cent.
The report notes that current mortgage rates make it difficult for the average household income to cover monthly payments “comfortably,” resulting in potential buyers continuing to wait on the sidelines. Interest rates posted by the major banks indicate five-year fixed and variable rates in the mid-four per cent range.
But troubling headwinds from Canada’s southern neighbour could have dire consequences on the country’s housing sector.
On Tuesday morning, U.S. President Donald Trump slapped 25 per cent tariffs on all Canadian and Mexican products (alongside 10 per cent duties on energy products), potentially pushing Canada into a recession, some economists warn. In return, Canada’s Prime Minister Justin Trudeau enacted retaliatory tariffs on American goods.
“The tariff war will act like a bucket of cold water on sales as there is a lot of general unease about what the overall impact will be on the cost of living and of course jobs,” said John Lusink, president of Right at Home Realty.
Shawn Zigelstein, broker and team leader at Royal LePage Your Community, said the trade war and economic uncertainty impacts consumer confidence.
“Will people be looking for that bright shiny new house or sitting back and waiting to see if something else happens to the economy and affects them purchasing down the road,” Zigelstein said.
Typically, from December to March sales are low as the winter season attracts fewer buyers, with the colder weather being a deterrent, Lusink added.
Because the winter weather can impact sales figures, the data isn’t a clear indicator of how the market is performing, he added. That said, the Ontario sales in February were “well below” Right at Home Realty’s forecast of 1,480 transactions — only 853 sales took place Ontario-wide last month, he said.
The surge in listings is a trend occurring nationally.
The Canadian Real Estate Association (CREA) reported the largest seasonally adjusted monthly increase in supply in the country since the late 1980s.
“We need to pay attention to that,” Lusink said. The historical period is of particular significance as it kicked off a deep recession and the housing crash. “It means we haven’t seen that sort of change (in supply) in decades.”
Numerous factors are behind the surge in listings, such as low sales resulting in homes staying on the market longer, over-leveraged investors off-loading their properties, and the increase in forced sales for homeowners struggling to pay their mortgage.
The Bank of Canada is expected to cut interest rates further this year, but it’s too early to say if “it will be enough to stimulate the market,” Zigelstein said.
