Canada: Home Sales and Residential Construction Continue their Downward Momentum in February

February’s seasonally adjusted 229k housing starts fell 4.6% from the prior month and came in below the consensus of economic forecasters (graph 1). Back-to-back blizzards across broad swaths of the country in February likely had a dampening effect on construction. The long-run trend for housing starts has been relatively flat despite variability in month-to-month data.

Most of February’s decline in housing starts was in the multi-unit sector, while single-family home construction held steady from January. Provincially, home construction saw strong gains in Alberta, while Quebec returned closer to its 6-month average following an unusually strong January print. Ontario saw a slight uptick in housing starts from a month ago, thanks to smaller centres like Ottawa and Hamilton, while Toronto’s housing starts fell significantly.

In the resale market, existing home sales fell sharply, by 9.8% m/m in February, after declining 3% the month prior. Although this weakness may be partly attributable to the winter storms mid-month, we believe that many of those waiting on the sidelines last year for mortgage rates to start coming down now seem to be hesitating due to the economic uncertainty of a trade war.

Listings reversed course last month, declining almost 13% from January. As a result, the sales-to-new-listings ratio rose to just under 50%. Despite the pullback in listings, there was little upward pressure on prices. The average price declined another 4.6% m/m, while the benchmark price fell back to its lowest point since March 2023.

Regional differences remained significant. Home sales in Quebec City rose almost 18%, while they fell nearly 9% in Montreal. Average prices were little changed in either city. The big story was Toronto, where sales fell a whopping 28.5% m/m—making February the month with the lowest number of (seasonally adjusted) sales since May 2020. As a result, Toronto remains in buyer’s market territory (graph 2), with average prices falling nearly 2% m/m. 

Looking forward, we expect a certain amount of resilience in housing starts in the near term, despite facing many economic and industry-specific headwinds (see our recent report External link.). However, these factors, paired with tariff-induced higher costs, will likely result in a slowdown in residential construction in due time. In contrast, those volatile economic conditions are being felt immediately in the resale housing market, and 2025 is likely to exhibit weakness in sales and prices.