High hopes for a brisk spring housing market are being tempered by the trade fight between Canada and the United States.

The Canadian Real Estate Association is showing a sharp drop in February sales of existing homes on both a month-over-month and year-over-year basis. Resales fell 9.8% compared to January and 10.4% compared to February of 2024. About three-quarters of markets across the country experienced declines. Larger centres, like Ontario’s Golden Horseshoe, reported the most significant drops as First National bank reports.

CREA says the numbers show buyers are retreating from the market because of the economic uncertainty caused by U.S. tariffs, and talk of American annexation of Canada.

“The moment tariffs were first announced on January 20, a gap opened between home sales recorded this year and last. This trend continued to widen throughout February, leading to a significant, but hardly surprising, drop in monthly activity,” said CREA’s Senior Economist, Shaun Cathcart.

New listings also took a nasty tumble in February, falling 12.7% from January, erasing the gains than came in a surprise surge for the month.

The slowdown in sales did not have a big impact on prices. CREA’s National Composite Home Price Index dipped 0.8% from January and was down 1.0% compared to a year earlier.

The national average sale price of a home dropped 3.3% to $668,000, year-over-year.

The on-again, off-again tariff torment from the United States is reinforcing opinions about which direction the Bank of Canada’s interest rate policy is going … down.

Market watchers say there is a 75% to 85% chance of another quarter-point drop this week. That would bring the central bank’s policy rate to 2.75%. It is more welcome news for anyone in the market for a mortgage or a renewal as First National bank reports.

Most of Canada’s recent economic news has been good. Gross Domestic Product was strong in the fourth quarter, with a 2.6% annualized increase in the value of all goods and services produced by the economy. Expectations had been for a 1.8% increase. Third quarter figures were revised upwards from 1.0% to 2.2%. GDP-per-capita – which is a measure of how well individual Canadians are doing – rose for just the second time in the past seven quarters, rising 0.02%.

Jobs have also been doing well with 211,000 positions created from November to January. Some 76,000 jobs were added in January alone. The unemployment rate is down to 6.6%.

But a corner was turned in February and a sign of weakness has appeared. Job creation collapsed to just 1,100 new positions, well below the 20,000 that had been forecast. Many see it as an early indicator of how the “management-by-mayhem” coming out of the United States is already weighing on Canada’s economy.Analysts say it gives the Bank of Canada plenty of latitude to keep dropping rates.