With U.S. tariffs sowing economic uncertainty, the Bank of Canada cut its key interest rate by 25 basis points to 2.75 per cent today in its seventh consecutive cut.

Experts are anticipating interest rates to fall even further, which could translate to lower mortgage rates, offering hopeful homebuyers a chance to enter the housing market.

Another factor that could present a potential reprieve for buyers is the current pullback in demand, putting power back into purchasers’ hands. The latest data from the Canadian Real Estate Association shows sales activity dipped 3.3 per cent in January, while new listings saw a double-digit jump.

“Buyers now have the widest selection of available homes in years thanks to a surge of properties listed for sale in January,” wrote Robert Hogue, assistant chief economist at the Royal Bank of Canada, in a recent housing report. “This is especially true in Vancouver, Fraser Valley and Toronto where bargaining power has clearly shifted in buyers’ favour.”

Hogue told the Financial Post that the weaker activity could be attributed partially to rough weather conditions, but the trade war is undoubtedly eroding buyer and seller confidence as well.

It’s possible that reduced demand could level the playing field for younger Canadians hoping to climb the property ladder.

“I think that it is a bit of a Goldilocks moment for young buyers, particularly of the millennial and generation Z cohort,” said Phil Soper, chief executive of real estate firm Royal LePage Real Estate Services Ltd. “The multiple offer scenarios (and) bidding war scenarios that gen X and older millennials had to deal with have dissipated considerably.”

Soper said he has noticed a 180-degree pivot where homeowners are now waiting to sell their home before beginning their hunt for another, which has meant fewer overall transactions. Instead, he has seen the majority of current transactions propelled by first-time homebuyers.

He compared the current economic uncertainty created by U.S. tariffs and trade threats to the COVID-19 pandemic that rattled the housing market five years ago.

“There was a lot of doom and gloom and then we found that we could, in fact, continue to operate the economy effectively and work our way through the challenges,” Soper said, pointing to the record-breaking housing market of 2021. “And so, the thesis in 2025 is it’s not as bad as people think.”

Soper believes the Bank of Canada will continue to cut its key rate and forecasted that mortgage rates could fall by a full percentage point by the year’s end, drawing more buyers from the sidelines.

The Canada Mortgage and Housing Corporation (CMHC) also forecasted in February that lower mortgage rates and last year’s mortgage reforms could activate the housing market, with the caveat that higher tariffs could lead to a recession, job losses and fewer sales in the housing market.

“Millennials, many of whom are first-time buyers, are currently driving housing demand,” the CMHC report said. “As remote work declines, we assume this group will prioritize being closer to jobs, boosting sales recovery in larger urban markets.”

Still, home prices could appreciate further, Soper said, despite the current softening in condo prices.

Both the Greater Toronto Area and the Greater Vancouver Area have seen falling condo prices amid a supply glut and lower demand, according to a recent report from Toronto-Dominion Economics.

But there are other factors that could support housing market growth this year, Soper said, pointing to the higher savings rate, which dipped to 6.1 per cent in the fourth quarter of 2024. This was still “substantially higher” than in 2023, according to Statistics Canada. As well, intergenerational wealth transfers from the baby boomers to younger generations are fuelling gains in net worth and homeownership among some.

The pullback on immigration levels and the foreign buyer ban could reduce demand and help with affordability challenges as well, he added.

“There are a lot of variables supporting the housing market,” Soper said. “The one variable that’s a drag is consumer confidence.”

In terms of buying power, some young Canadians experienced major wealth gains through homeownership during the pandemic years, said TD Bank economist Maria Solovieva.

The most recent Survey of Financial Security from Statistics Canada indicated that families where the highest income earner was less than 35 years old saw the largest per cent increase in their real median net worth from 2019 to 2023, up by 179 per cent during this period to $159,100. The young families with the biggest wealth gains were homeowners, their net worth climbing to $457,100 in 2023.

However, Solovieva pointed out that even if the market presents an opportunity with lower mortgage rates and more affordable prices, younger Canadians might not necessarily be in position to take advantage of it.

Canada’s unemployment rate held steady at 6.6 per cent in February, but could edge higher if tariffs deal a blow to businesses, leading to layoffs, lower demand for labour and lower wages.

“It could potentially be risky for younger households to take advantage of lower prices, in a time when it’s uncertain whether they will have a job in the future,” Solovieva said.

RBC’s Hogue said, “The crystal ball is very, very foggy as far as the impact on the housing market.”

He added that affordability remains a major issue in markets such as Toronto and Vancouver, so while lower interest rates and flat prices could provide relief for some buyers, others will be staying on the sidelines.

“It doesn’t mean that people will not be able to realize their dream of homeownership,” he said. “It might just mean that they’ll have to make some compromises in terms of location and housing types, (like purchasing) a condo instead of a semi-detached or a detached home.”

• Email: slouis@postmedia.com

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