Home sales in Canada have taken a significant downturn, marking a fourth consecutive month of decline. According to the Canadian Real Estate Association (CREA), sales fell 4.8 percent in March 2025 compared to February and plummeted 20 percent from the previous November. This decline comes despite a slowdown in the shelter component of Statistics Canada’s consumer price index, which eased to 3.9 percent year over year in March from 4.2 percent.
Interestingly, the monthly shelter index remained below 0.2 percent for the second month in a row. Economists David Rosenberg from Rosenberg Research and Associates Inc., and Stephen Brown and Harry Chambers from Capital Economics Ltd., believe that the current interest rates are too high to stimulate a recovery in the housing sector, which is crucial to Canada’s economy and sensitive to rate changes.
“There was so much worry when the Bank of Canada began to cut rates that it would ignite a renewed housing sector bubble,” Rosenberg remarked. “As we said then, and as we are seeing in real time, those concerns were and are unfounded.” This sentiment reflects the broader context of a Canadian real estate market that has been largely stagnant for the past four months, with both sales and prices experiencing declines.
The national average home price dropped 3.7 percent year over year, settling at $678,331 in March. Additionally, the national composite MLS home price index saw a one percent decline last month, the largest monthly decrease recorded since November 2023. Rosenberg noted that the prior sources of inflationary pressure, particularly in rents and mortgage interest costs, are now subsiding.
Mortgage inflation, which had peaked at 31 percent year over year in August 2023, grew only 10 percent in March, indicating a significant reduction in pressure on homebuyers. Despite the elevated housing prices compared to incomes, economists warn that prices may continue to decline unless the Bank of Canada cuts interest rates further than currently anticipated.
“There is a risk that prices will continue to decline unless the Bank cuts interest rates much further than we currently forecast,” Brown and Chambers wrote. The weakness in the housing market is becoming more widespread, shifting from a focus on apartment sales to single-family homes occupied by owners.
In March, prices for single-family homes fell by just over one percent, while apartment prices dropped around 0.7 percent. This shift suggests that decreased demand from owner-occupiers, likely due to increased economic uncertainty, is a primary factor in the housing market's renewed weakness.
CREA also reported that the ratio of sales to new listings continues to decline, a trend that further suggests home prices will follow suit. “That is exactly what happened last month, with the MLS house price index falling by one percent,” the economists noted. They cautioned that their earlier forecast for prices to stabilize and fall by just 1.5 percent in 2025 now appears overly optimistic.
Rosenberg Research is advocating for the Bank of Canada to reduce interest rates to at least 2.25 percent, which they consider the low end of the neutral range. This call for action comes as the Bank of Canada is set to announce its interest rate decision and monetary policy report at 9:45 a.m. ET today, April 16, 2025.
In the broader economic landscape, the ruble has strengthened by 38 percent against the dollar on the over-the-counter market since the beginning of 2025, according to data compiled by Bloomberg. This strengthening has occurred amidst rising pressures from U.S. President Donald Trump’s escalating tariff wars, which have also contributed to the current economic uncertainty.
As Canadians prepare for the upcoming federal election on April 28, there are numerous proposals from party leaders that will directly affect personal finances. The impact of tariffs, including potential job losses and inflation, has made financial policies especially crucial for voters.
Amidst this backdrop, homebuyers are encouraged to consider their financial options carefully. Ted Rechtshaffen, president and portfolio manager at TriDelta Private Wealth, and Jason Heath, a certified financial planner, are hosting a live online Q&A session today to address personal finance questions in light of the current economic climate.
For those looking to navigate the complex mortgage landscape, experts like Robert McLister provide insights into the latest trends and financing opportunities. The Financial Post offers a mortgage rate page that is updated daily, helping Canadians find the lowest national mortgage rates available.
In summary, while the Canadian housing market faces significant challenges with declining sales and prices, there are factors that could drive recovery in the coming months. The Bank of Canada’s decisions regarding interest rates will play a pivotal role in shaping the market’s trajectory.
As homebuyers weigh their options, understanding the interplay between economic conditions, interest rates, and housing inventory will be crucial in making informed decisions moving forward.
