Economic turmoil clouds housing market for 2025
Home sales rose in 2024, but median price dropped 17 per cent
This started out as a straightforward piece about home sales last month and over the last year, then I wondered what about the forecasts for this year and things took a turn. I think that will be happening a lot this year of Trump/Trudeau/Poilievre and whoever.
So, strap in and we’ll look at a bunch of numbers and then check the entrails.
As I’ve been writing each month over past year, the real estate market in Trent Hills was fairly soft. Home sales were up 9 per cent in 2024 over 2023, 213 compared to 195, but the median price was down 17 per cent at $520,000 in December.
Last month, 11 detached homes sold in the municipality, up one from 10 in that month in 2023, according to statistics from the Central Lakes Association of Realtors. The weaker market indicated by the price drop is also reflected in the number of listings for sale, more than doubled to 87 from 41, at the end of each year.
The length of time a house is on the market before it sells is another good indicator of how strong demand is. The homes that sold last month had been on the market for an average of 83 days, while a year earlier that was 64 days.
You can see how much the market has slowed recently, because for the year as whole, houses sold in 45 days, compared to 33 days in 2023. Last spring was quite strong until it wasn’t, which skewed the numbers for the year.
Not surprisingly, realtors say good times are coming.
“As is typical for the holiday season, we observed a decrease in the number of sales across all our regions compared to the previous month,” said Vicki Sweeney, president of the realtors’ association that covers Durham, Northumberland, Hastings County, Prince Edward County, Peterborough County, and Kawartha Lakes. “However, both new and active listings saw month-over-month increases in all areas. With the interest rate cuts implemented in the latter half of the year and the introduction of new mortgage rules in Canada, we’re beginning to see more individuals enter the market.”
Actually, Northumberland County reported 68 sales in December 2024, marking a 33% increase from 51 sales in December 2023. The average price also rose by 5%, climbing from $680,374 to $712,432 over the same period.
During the year, 1,411 homes sold in the county, up 14 per cent from 2023, but the median price was stable, down about 1 per cent at $668,000.
What can we expect for 2025?
By some accounts, the Ontario housing market is projected to experience notable growth in 2025, driven lower interest rates, policy changes, and sustained demand. The Canadian Real Estate Association (CREA) anticipates a 9.9% increase in Ontario home sales for 2025, following a modest 1.5% rise in 2024. The average home price in Ontario is expected to rise about 2.4% in 2025.
But while the Bank of Canada has reduced interest rates, the extreme uncertainty caused by the new Trump government means rates may jump.
American economist Paul Krugman wrote this week that something strange is going on in the market for long-term bond. Not strange in a good way.
The U.S. Federal Reserve Bank has also cut short-term rates, the same as the Bank of Canada, but neither controls long-term rates, which are determined by investors and where they think the economy is headed.
Those investors clearly think trouble is coming and interest rates are going to turn up. Krugman says the unprecedented divergence between short- and long-term rates “might reflect the horrible, creeping suspicion that Donald Trump actually believes the crazy things he says about economic policy and will act on those beliefs.”
The headline on Krugman’s column captures the tone of his fears: Is There an Insanity Premium on Interest Rates?
Closer to home, we face a provincial economy that is already sputtering. The unemployment rate is 7.6 per cent, the highest in seven years, up from 6.1 per cent a year ago.
We could create jobs building new homes, but that’s not happening.
“Over the last six years, Ontario has ranked in the bottom half of provinces in terms of homebuilding per capita,” economist Mike Moffatt said in a recent report. “The situation is likely to get worse before it gets better. Although housing starts are up this year in eight of 10 provinces, Ontario has experienced a substantial decline in housing starts, thanks to a combination of poor economic conditions and overly restrictive policy.”
Moffatt, my favourite commentator on housing issues, wrote this week that the province and municipalities need to slash development fees and other restrictions in order to get housing built.
His analysis makes sense for larger centres that drag their feet approving new construction, but here in Trent Hills we have several subdivisions that have been sitting unbuilt years after their OK. The challenge here is that developers are awaiting growing demand that will make those homes profitable.
The Ford government has promised we would build 125,000 homes in Ontario in 2024, but the total is expected to come in act just over 81,000. It has also set a long-range target that is fictional.
In addition, immigration has been cut in a bid to reduce demand for housing, but that means less demand for student rental housing in places such as Belleville, Peterborough, and Oshawa. Those changes will impact us here, in a market that is at best expected to grow slowly over the next 30 years.
But it’s when you look outside Ontario and Canada that the economic forces get really scary. A report by Eurasia Group predicts that the economic turmoil caused by tariffs, immigration cuts, and inflation, will force the U.S. Fed to keep interest rates high. It’s likely Canada will have to follow suit.
Looking specifically at Canada it says: “A stronger US dollar—bolstered by a Federal Reserve forced to keep interest rates higher for longer—will put further downward pressure on the Loonie, and weaker US demand will weigh on an already sputtering Canadian economy. Add to that the potential for disruptive tariffs on Canadian goods—in the worst case, a US-Canada trade war—and 2025 looks like a year of considerable economic uncertainty for Canada.”
In addition, the report warns: “We are heading back to the law of the jungle. A world where the strongest do what they can, while the weakest are condemned to suffer what they must.”
It concludes, “The risk of a generational world crisis, even a new global war, is higher than at any point in our lifetimes. … We’re entering a uniquely dangerous period of world history on par with the 1930s and the early Cold War.”
Whew. But somehow, at the end of their report, the authors Ian Bremmer and Cliff Kupchan maintain that they are optimistic. Sounds like they would be good real estate salesmen.
You can read all Trent Hills News stories anytime on the website.
I could hardly read past the first photo caption: THAT is listed for 875!?! Absolutely absurd and shameful.