CMHC predicts home sales, prices to rebound in 2025, but tariff threat clouds outlook

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CMHC predicts home sales, prices to rebound in 2025, but tariff threat clouds outlook

Canada Mortgage and Housing Corp. is forecasting a rebound in home sales and prices this year as homebuyers take advantage of improved borrowing conditions, but says its outlook is clouded by the threat of widespread tariffs from the U.S.

The national housing agency said a trade war between Canada and the U.S., combined with factors such as reduced immigration targets, would likely slow the economy and limit housing activity, even as some households see improved buying power in the short-term

While U.S. President Donald Trump announced a month-long pause on his plan to slap 25% tariffs on Canadian imports earlier this week, uncertainty continues to linger, said CMHC deputy chief economist Kevin Hughes.“There are tangible effects, but there also are sentiment effects as well,” Hughes said in an interview.“There is that investment uncertainty that is weighing on the future of business and also the Canadian dollar.”

The agency’s 2025 market outlook report said in a scenario where high tariffs were imposed, it would temporarily raise inflation while prompting the Bank of Canada to lower its key policy rate to support the economy.

In that scenario, it predicts a recession would prolong Canada’s housing recovery, leading to more homebuyers delaying purchases and fewer homes being built.

If U.S. tariffs turn out to be more limited and shorter-lasting than previously thought, CMHC said better financing and business conditions would prompt more homes to be built and more accessible home ownership.

Despite those challenges, the report predicts the combination of lower borrowing costs and Ottawa’s changes to mortgage rules will help unleash pent-up demand from those who have felt priced out of the market.

The federal government has raised the price cap for insured mortgages to allow more people to qualify for a mortgage with a down payment of less than 20 per cent.

Ottawa also expanded its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.

Six straight cuts by the Bank of Canada to its key policy rate since last June have brought it down to three per cent.

The CMHC report noted the central bank is expected to further cut rates in 2025 to control inflation and support the economy amid new tariffs.

“Right now as we speak, we are not in a tariff situation, so we are in an economy where interest rates have gone down, which has been a boost for borrowing, not only for potential homeowners … but also for investors,” said Hughes..