The winter sets in

The housing market has frozen. Regardless of the outcome tomorrow, the ice will remain.

Not only is this faux spring season a major letdown for realtors, brokers, lenders and the guys covered in drywall dust, but all of 2025 may go down as one of the worst years in living memory for house sales. The interest rate declines have ceased, at least for a while. The layoffs have started. The death of The Bay is not Trump-related, but emblematic of what’s happening in retail. Remember that two-thirds of our economy depends on consumer spending and confidence. Both are running on empty.

The trash talk from the White House continued last week, leading up to today’s vote. The weaselly wee sec’y of state, Marco Rubio, amplified the ‘annex Canada’ talk on NBC yesterday. These dudes are real. The threat is growing. More tariffs coming on Saturday. Yikes.

So we get a real estate freeze in April, just when prices, bidding wars and FOMO are supposed to explode. Look at Calgary – steamy a year ago, but this month with sales down 19% y/y and active listings up 101%. In a few days stats out of Van and the GTA will tell a similar tale. The phones aren’t ringing anymore. Prices have yet to decline in any serious way, but there’s no telling what July will bring.

The perennial question remains: will people buy when prices plop by 15% or 20%? Or will they retreat waiting for bigger declines or (more likely) because they’re afraid to act? Recall that the weird thing about real estate is the more it costs the more people want it. So when prices drop, so do sales levels. Humans are ridiculous.

Anyway, check out this chart. It plots the sales-to-new-listings ratio (SNLR), which tracks how quickly fresh properties find buyers. The ratio is a good indicator of consumer confidence and market strength. Above 60% we call it a ‘seller’s market’ when bidding wars, multiple offers and over-asking deals are common. Below 40%, in a ‘buyer’s market’ the sellers are happy to take what they can get during a drought of interest, leading to low-ball offers and falling sale prices.

Where are we now? A lowly 29% – far below the ten-year average, and just a third of level seen three years ago. The buyers are gone (which makes you wonder why everyone says there’s a shortage of houses – which are sitting and accumulating, unsold).

This is a buyer’s market of historic degree

Source: @OutlineCa

TD economist Rishi Sondhi points out that during March (the last full month of data available) sales nationally dropped again – by about 5%. It was the worst level since last 2023. “Notable sales declines were recorded in B.C. and Ontario (both down 7% m/m), with a smaller drop in Quebec (-3% m/m). Meanwhile, sales were flat in Alberta,” she points out. New listings went up, so nationally the SNLR for all of Canada hit its lowest point since way back in the Credit Crisis of 2009.

Total properties for sale in the nation (resales, not new stuff) was up 18% y/y at 165,800. That is almost a five-month supply – which compares to eight days in Toronto back in 2021, when values were skyrocketing. (Remember what I just said about in the relationship of sales and prices?)

“March’s decline was not much of a surprise given that tariff-related economic uncertainty remained elevated last month,” she adds. “For the first quarter overall, sales plunged 12%, which will weigh on residential investment and overall economic growth. Canadian listings pushed higher last month. Notably, markets are hugely tilted in the favour of buyers in B.C. and Ontario and are even loosening rapidly in the once drum-tight Alberta market.”

The conclusion: price declines are coming. Nationally the price of a home fell 5% in the first hundred days of this year. There is more to come. Perhaps a lot more.

This decline will be accelerated by events. If the Trump trash talk continues after our election is done, confidence will be eroded. If tariffs continue to accumulate and are extended to additional sectors, more impact. If layoffs mount in the auto sector, if retail founders more and the unemployment rate rises, real estate will feel it. And if the Bank of Canada responds with a couple of rate cuts (now more possible with a stronger dollar) the impact on buyer confidence will be slight.

All of that seems reasonable, logical and realistic. There is nothing a new Lib or Con administration can do immediately to shut 47 up, rewind the economy, reverse tariff damage or restore lost jobs. It can only increase debt/deficit spending to blunt the impact and support afected workers while we engage in longer-term restructuring so this never happens again.

And meanwhile the listings pile up. Like with freehold homes in Toronto – taking this chart to a new high.

Unsold resale homes piling up fast

Source: Scott Ingram, TRREB

So, expect 2025 to suck if you are a commission-only, eat-what-you-kill realtor or mortgage broker. There is much more disruption to come, but with it we’ll get (a) a vastly larger pool of homes to choose from, (b) the most motivated sellers in years, (c) flexible, quasi-desperate lenders and, yes, finally, (d) meaningfully lower sales prices.

It’s coming. And most will miss it.

About the picture:  “Been on the sideline reading and enjoying your blog for years,” writes Reeny in Victoria, “but never commented. As a renter…no pets. This is my sister Kelly’s best friend Beamer enjoying Ottawa snow.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/04/28/the-winter-sets-in/