Major markets took a step back in July – and one expert sees US chaos continuing to impact homebuyers
A modest bounce-back in Toronto housing market activity stalled in July as year-over-year home sales fell for the first time in five months.
In Vancouver, meanwhile, residential sales also slipped – falling by nearly 10% and essentially wiping out a substantial June gain as buyers retreated to the sidelines once more.
Royal Bank of Canada (RBC) sounded a positive tone on the outlook for Toronto despite the yearly sales decline, pointing to a two-month jump in prices in the city, but highlighted the likelihood of “significant unevenness” in the national housing market persisting for the foreseeable future.
One of the main reasons for a subdued overall outlook is no surprise, according to Ownright co-founder and chief operating officer Joel Fox (pictured top): the fact that Canadians’ unease about the national economy isn’t showing any sign of vanishing.
President Trump’s vow in recent weeks to slap huge new tariffs on a range of Canadian goods has revived the cross-border uncertainty that has dissuaded many potential homebuyers this year, while another escalation in the US-Iran war has stoked fears of another inflation flareup.
“There was a bit of a moment of optimism in my mind when it seemed like the Iran conflict was coming to an end and there hadn’t been any major Trump effects in a while,” Fox told Canadian Mortgage Professional.
“And then that just came roaring back with the 50% tariffs that he has recently been wanting to impose. That just drives uncertainty again.”
Tariffs complicate the picture for the Canadian economy
For Fox, decisions made in Washington have a significant ripple effect on the Canadian economy and the homebuying outlook here – and he doesn’t see a sustained improvement in purchaser intentions until some of the Trump-led chaos eases.
“I believe the real impact on the market right now is the broader economic uncertainty and I very much believe that’s being driven by much of what’s happening south of the border,” he said. “The way that we bounce back is if we get some stability there and some confidence that we’re not going to have a major headline every couple of weeks. But I just don’t think that’s going to happen.”
The Canadian Real Estate Association (CREA) recently cut its 2026 outlook for the second time this year, now forecasting a 1.4% decline in national home sales compared with last year. That’s a downgrade Fox said tracks with his own expectations for the remainder of 2026.
“It’s either the market stays on the course it’s been on – and CREA has adjusted its forecast accordingly – or we all just get more numb to the activities driving uncertainty from south of the border, and people start opting into the market because this uncertainty has become the new normal,” he said. “But I really don’t expect that to happen in the second half of this year.”
Toronto and the national outlook move in step
Fox doesn’t see the Toronto market diverging from the national trend despite the gradual recovery in activity seen before Trump’s latest tariff announcement.
CREA’s forecast singles out Ontario as the only province expected to post annual sales growth this year, but that’s by no means a surefire bet. “There’s clearly an assumption that things will start to increase year over year for the rest of the year – but I just don’t necessarily see why that would be the case, or any different than the rest of the country,” Fox said.
The US-Iran war has also stirred speculation about a possible Bank of Canada interest rate hike in the months ahead to combat inflationary pressures, another development that would likely mark a negative step for the national housing picture.
But while that could keep homebuyer sentiment subdued in Canada, Fox doesn’t see the current gridlock lasting forever – and said buyers will eventually realize there’s no perfect time to enter the market.
“The only way we get past that [chaos] is if it becomes so normalized in people’s minds that they stop worrying about it, and just power through that economic uncertainty and choose to participate,” he said. “I don’t think that’s going to happen this year, but I think it’s on the horizon because it has been so long and it really feels like it’s becoming the new norm.
“You have lots of people sitting on the sidelines choosing not to participate right now and trying to wait things out. Eventually they’re just going to say, ‘This is how it is and I can’t hold back any longer.’”
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