Ah, Ontario in February—truly a winter wonderland… if your idea of paradise involves relentless snowstorms, icy sidewalks that could double as ice rinks, and temperatures that make you question every life choice that led you to live in this frozen tundra. It’s the season when every trip outside is a thrilling adventure in survival, and you can finally check off “getting snowed in” on your bucket list. Forget about sunny beaches; all you need is a nice thick coat, a shovel, and the hope that your car will actually start after being buried under a foot of snow. February in Ontario is basically nature’s way of reminding us that winter isn’t just a season, it’s a full-on endurance test.

Looking ahead to spring and summer, the real estate market is expected to be the busiest in years, thanks to lower mortgage rates.

Unpacking CREA’s 2025 Housing Market Outlook & Interest Rates

The Canadian Real Estate Association (CREA) has released its updated forecast for the 2025 housing market, predicting a year of recovery with moderate growth in both sales and prices. While the outlook remains largely in line with CREA’s fall 2024 predictions, several key factors are expected to shape market activity across the country. Here’s a breakdown of the major trends and regional differences that will define Canada’s housing market over the next few years.

Key Drivers Behind the 2025 Market Rebound

One of the most notable factors in CREA’s 2025 forecast is a strong rebound in demand. Several elements are expected to contribute to this uptick:

• Pent-up Demand: After two and a half years of stagnation, many buyers who have been waiting for the right moment to enter the market are expected to return, driving up transaction volumes.
• Lower Borrowing Costs: With borrowing rates anticipated to remain relatively low, homebuyers will have greater purchasing power, which will likely encourage more buyers to act.
• Spring Listings Surge: The usual seasonal increase in listings is expected to align with the anticipated rise in demand, creating a more active and balanced market.

A glimpse of this recovery was already seen in the fourth quarter of 2024, when market activity began to pick up across much of the country.

Bank of Canada Interest Rate Expectations

The Bank of Canada will play a key role in shaping the housing market in 2025. There is widespread expectation that the central bank may signal interest rates have reached their lowest point for this cycle. This potential shift could prompt more buyers to secure fixed-rate mortgages before rates rise again. If rates stabilize or dip slightly, it could spark a rush of demand from those waiting for favorable terms.

Regional Variations in Market Performance

While the national outlook for 2025 is positive, regional differences are expected to shape how the recovery unfolds.

• British Columbia and Ontario: These two provinces are projected to experience the largest sales rebounds due to currently low sales levels and increased inventory. However, price growth is expected to be more modest in these markets, as home prices in cities like Vancouver and Toronto are already high. Buyers may find more opportunities in terms of inventory, but price hikes will likely be restrained.
• Alberta and Saskatchewan: In contrast, these provinces are expected to see a stronger rebound in prices. With near-record sales in 2024, low inventories, and relatively more affordable prices, demand is likely to continue pushing prices upward in these areas. The affordability factor will make Alberta and Saskatchewan more attractive compared to pricier markets in the west and east.
• Manitoba, Quebec, and the Atlantic Provinces: These regions are expected to fall between the extremes of the western provinces and the more expensive Ontario and British Columbia. We can expect to see higher sales and price growth in these provinces, although supply constraints may not be as pronounced as in Alberta and Saskatchewan.

Risks to the Housing Market Outlook

While CREA’s forecast for 2025 is largely optimistic, there are several risks that could influence the housing market’s trajectory:

• Upside Risk – Pent-up Demand: The buildup of demand could materialize all at once, leading to a surge in activity that could create supply shortages in certain areas. This could drive prices up faster than expected.
• Downside Risk – Trade War with the U.S.: Another potential risk is the threat of a trade war with the United States, which could create economic uncertainty and dampen housing demand. This risk is not fully incorporated into CREA’s current forecast but is being closely monitored.

CREA has stated that these risks will be evaluated in the coming months, with adjustments made to the forecast during the next update in April 2025.

2025 Sales and Price Predictions

Looking ahead to 2025, CREA has provided the following market projections:

• Home Sales: CREA predicts that 532,704 residential properties will be sold in 2025, marking an 8.6% increase over 2024. This is an upward revision from the previous forecast, reflecting stronger-than-expected market activity in late 2024.
• Average Home Price: The national average home price is expected to rise by 4.7%, reaching $722,221 by the end of 2025. This is slightly higher than the 4.4% increase previously forecast, indicating stronger price growth, particularly in regions outside Ontario and British Columbia.

2026 Market Outlook

Looking further ahead, CREA expects the housing market to continue its recovery into 2026:

• Home Sales: An additional 4.5% increase in home sales, bringing the total to 556,662 units.
• Average Home Price: The national average price is projected to rise by 3.3% to $746,379 by 2026.

Conclusion

Overall, 2025 is expected to be a year of recovery and growth for Canada’s housing market. While pent-up demand, lower borrowing costs, and the usual spring listings boost are all expected to contribute to a more active market, regional variations in sales and price growth will shape how the rebound unfolds across the country. However, there are still risks on the horizon, including the potential for a sudden surge in demand and the possibility of economic disruptions, such as a trade war with the U.S. Buyers and sellers alike should stay informed and ready to adjust their strategies as market conditions evolve throughout the year.

Reach out any time Matt@Huronmortgages.ca