Unit 223 at 30 Merchant Lane in Toronto's Junction Triangle neighbourhood listed with an asking price of $979,990. After 68 days on market, the home sold for $955,000.Pope Real Estate Ltd.
The upheaval of the United States-Canada trade war has economists on Bay Street revising their forecasts while home buyers and sellers rethink their plans.
Rishi Sondhi, an economist at Toronto-Dominion Bank, recently cut his forecast for home sales and prices this year after a weak first quarter for real estate in many Canadian cities.
The one-two punch of winter storms and tariff turbulence sent a chill through markets in the opening three months of the year, Mr. Sondhi says.
While transactions may pick up, he adds, elevated uncertainty and a deteriorating jobs market will likely weigh on growth for the remainder of the year.
On a national basis, Mr. Sondhi is predicting a 3.2 per cent dip in the average price this year, while sales will edge down 0.9 per cent, he says in a recent report.
Among the provinces, Ontario will be hardest hit with a 7.6 per cent drop in the average price and a 6.4 per cent decline in sales, the economist expects.
Robin Pope, a broker at Pope Real Estate, says many potential buyers in the Toronto area are also watching prices and wondering if they will continue to slide.
“No one wants to catch a falling sword.”
Many buyers are in no mood to be decisive, he says, because they figure the economic uncertainty will lead to downward pressure on prices.
“Sellers understand that now,” he says.
That acceptance on the part of sellers has helped to break the stalemate that paralyzed the market and held prices flat through most of 2024 when homeowners held out for sums that they saw their neighbours fetch at the peak.
Now that many sellers are resigned to the fact that those milestone prices are not likely to return any time soon, they are facing buyers who are looking ahead – to see if prices have farther to fall.
Mr. Pope sees many consumers who are anxious because the impact of the trade war is so unpredictable. He understands the fear surrounding what for many is their largest asset.
“Why would you make the biggest purchase of your life if you don’t have to?”
Fewer buyers circulating can result in a good deal for those who do feel confident enough to make a purchase, he says, and move-up buyers who are insulated from economic shocks may do well.
“It’s a good time to be buying but not a great time to be selling,” he says.
Mr. Pope recently spoke with one client who is hoping to sell a condo unit in the $4-million to $5-million range after it was purchased in preconstruction. The client figures that people who can afford to buy in that price range are immune to factors such as higher interest rates.
Mr. Pope says that’s a flawed perception.
“They may be insulated from interest rates, but they’re not insulated from the fear of paying more than they have to,” Mr. Pope points out.
Another pair of owners are contemplating selling a beautiful condo apartment they purchased two years ago for a price north of $2-million.
Mr. Pope advised the couple to wait if they can because they may end up selling at a loss if they go to the market now.
In another instance, he listed a two-bedroom, two-bathroom condo in a coveted neighbourhood with an asking price around the $1-million mark. By Christmas, the sellers agreed to trim the price by 10 per cent.
An offer landed, but the buyer was offering 10 per cent below the revised price and worried the sellers might feel insulted.
“We weren’t insulted, but we certainly were not going to give the property away,” says Mr. Pope, who signed back a counter-offer. “It was a price to signal to the buyer we were interested in a negotiation but they had to come up significantly.
“I did not leave that to interpretation,” adds Mr. Pope, who explained the sellers’ position to the buyer’s agent.
The buyer did not return to the table.
Some sellers are feeling financial pressure, Mr. Pope says, and buyers are often trying to suss out which ones.
“If a buyer senses any type of panic or desperation, they’re going to exploit you,” he says.
Mr. Pope recommended that the sellers consider listing the property for rent until demand picks up.
“I basically tell people they have to have a Plan B in this market. You have to be able to pivot.”
In another case, he listed a two-bedroom condo townhouse for sale after overseeing some improvements to the property for an investment of $50,000 or so.
Mr. Pope listed unit 223 at 30 Merchant Lane with an asking price of $979,990, which was a little higher than a nearby townhouse had fetched previously.
He and the sellers were emboldened by the renovation, says Mr. Pope, and the knowledge that the townhouse was a rare offering in the Junction Triangle neighbourhood, which has mostly single-family houses.
“There was no fire sale. We had committed that if it was going to take three or four months to find the right buyer, we were confident.”
After 68 days on market, the home sold for $955,000.
The sellers were happy with the result, which did surpass the previous comparable sale, he notes.
But the process did take longer than it would in a robust market.
“Something was holding other buyers back from opening up their pocketbooks – and I think it was uncertainty,” he says.
TD chief economist Beata Caranci notes that the tariff situation remains fluid, but the executive order U.S. President Donald Trump signed in March to impose 25 per cent tariffs on the auto sector creates downside risk for Canada’s economic growth this year and greater upside risk to inflation.
At Capital Economics, North America economists Bradley Saunders and Stephen Brown now expect tariffs to push Canada into recession.
Government support should prevent the downturn from becoming too severe, they say.
While the Canadian economy has defied recession fears in the recent past, the big difference this time is that immigration has shifted from being a tailwind to a headwind, with more temporary residents now leaving the country than arriving and the population on track to contract this year.
Even in the event the United States quickly backs down on tariffs, they say, economic growth would likely remain weak amid concerns that any pause in the trade war could be temporary.
Mr. Pope began selling real estate in 1990, when the Canadian economy fell into a recession, and the housing market spiralled downwards. It remained in the doldrums for the rest of the decade.
Many agents who have entered the business in the past 10 or 12 years don’t understand how long a downturn can last, he points out.
Some of those who are predicting the market will turn around later this spring haven’t experienced a rocky economic backdrop, he adds.
Looking ahead, Mr. Pope says sales may pick up a little bit after the federal election because the vote will add some clarity.
While the Bank of Canada’s campaign to reduce interest rates is a positive development for the market, the tariff tumult is overriding any optimism for now.
Seven consecutive cuts have brought the central bank’s benchmark rate to 2.75 per cent, but so far, each reduction has not moved the needle much when it comes to real estate sales, he notes.
“There may be optimism and little spurts of a run on the market here and there, but I don’t think they will be long-lived.”