Toronto Housing Market Bubble

Despite falling home prices in August, Toronto home buyers have that sinking feeling that accompanies a recession. As covered in the Toronto housing market report, sellers are listing their prices. They want their dream price, but as the market slides many of them are starting to give in and entertain some lower offers.

The point to make might be that buyers and sellers are feeling nervous, and buyers may decide to wait this impending recession out, or at least till home prices hit bottom. With prices so high and mortgage rates so high, buyers are making an enormous gamble.

Just a story here, that one Realtor in my town has an interesting slogan on his lawn sign on his client’s front yard.  It says in large letters “Accepting Offers.”  Well, it appears he’s not getting offers, because that sign has been up for a while now. The fact is, the market is swinging slowly to a buyers market and perhaps to a correction. Listings are rising, prices are falling. The new slogan might be “Please make an offer!”

The Ontario economy feels eerily similar to 1979 where a stagflation economy would see the end of the post world War II era prosperity and growth. Unemployment rose especially for young people and Ontario’s manufacturing sector slowed. I remember it well, and I would leave for Calgary, Alberta the next year. But the early 80s were not kind, and the price of oil fell to $12 a barrel.

It’s important to remember that the US could also have a setback. It’s unlikely, but that would add to Canada’s woes and result in fewer exports from the GTA region to US states.

Pressure from President Trump

The Brookings Institute and Trade Secretary Howard Lutnick have stated their belief that President will renegotiate the USMCA trade agreement.  If the USMCA deal can’t be ended, Trump will likely take other measures to reduce imports from Canada. And Ontario’s manufacturers are looking particularly vulnerable.

Canada has enjoyed a great economic run on the back of the US, but those days are gone. President Trump’s tariffs are sticky, and the trade relationship has significantly and perhaps permanently changed. There will be a review of the USMCA deal next July, but Trump wants to renegotiate sooner.

What’s not talked about is the full cascading effect of President Trump’s bills amidst of such weakness in Canada.

Why Could the Toronto Housing Market Crash?

• commercial/retail market in jeopardy
• condo market in jeopardy
• locked in mortgage holders forced to renegotiate at much higher rates
• mortgage delinquencies are rising
• unemployment rising fast in Toronto
• manufacturing sector slumping
• Canadian government set to reduce spending
• Ontario’s and Toronto’s government is a big concern
• Fed government set to cancel the abused temporary worker program — big increase in outmigration
• business indecision due to US government uncertainty (legal action against Trump’s tariffs)
• massive numbers of condos delivered in 2025
• new listings are growing
• large inventory of homes for sale
• prices much too high for a buyer pool with limited financial means
• most buyers are using bank of mom and dad and the risk is high now
• an expectation of an economic slowdown or disaster
• Liberal government doesn’t want to end supply management making a US trade deal unlikely

The US/Canada trade conflict is serious, and unacknowleged. Trump has stated strong allegiance to American workers and companies. We have to remember that at some point, the Liberal government would have to retaliate and keep US goods out of Canada, due to unfair tariffs.

“A trade war started by U.S. tariffs would really be an unfortunate and problematic thing for housing in Canada,” — Kevin Lee, CEO of the Canadian Home Builders’ Association (CHBA).

Now in 2025, all those price-boosting factors are perhaps nearing a crescendo. Too many precipitating factors happening at once, could result in buyers rejecting the housing market for some time. Sales are happening of course, out of actual need for a home, and supply is still not optimal. That helps. But with supply growing and buyers becoming cautious, the stage is set for a correction. Experts state that a crash is unlikely, and that a slowdown is likely.

Toronto Home Prices: Primed for a Collapse?

Toronto housing sales have already suffered a steep decline to due to low supply from real estate regulations and unaffordable prices. With incomes plummeting, interest in homes will continue on downward trajectory.

Ontario Already Had a Trade Deficit: Alberta Enjoyed a Surplus

What’s unfortunate is the dirty little secret got out that the US actually has a trade surplus with Ontario. The Trump treatment of Toronto and Canada is unjustified. His desire to have Trudeau and the Woke Liberals removed from office is likely the crux of the matter. With them gone, he might remove the tariffs. If not, the GTA job market and housing market will almost certainly crash. And it appears Torontonians aren’t prepared or willing to think about this massive threat.

The list of crash factors that could cause this price correction are listed below.  Home sales have been significantly low for many years, but might a small uplift as home and condo prices drop and mortgage rates fall. Bankers of late says mortgage rates will rise even in the BoC interest rate falls. It’s because of a long-term concern over US inflation.

As we await the full reaction of TSX, and US stock market investors on Monday, enabled home buyers might begin to prepare their home search as homes are unloaded in the next 6 months. Canadian mortgage rates are still too high, and as thousands of locked-in homeowners have to refinance (especially without a job), many will have to sell quick.

Seasonally adjusted sales fell 18.7% in December from November to 5,359 units, marking the lowest sales level since July, Toronto Regional Real Estate Board data showed. Compared to December 2023, sales were down 6.8%. — Reuter’s report.

New Homes and Construction Sector

Ontario’s homebuilding sector is robust and fully employed, but the cost of homes make them a risky and impossible investment play. Investors will stay away, and demand will plummet. Employment and revenue loss could be meaningful.

Tyler Choi of Renxhomes.ca in a new report reveals that new home sales fell to their lowest level in almost 40 years during 204. And only 310 new homes were sold in December 2024, 80% below the region’s 10-year average. The benchmark price for new single-family home was $1.6 million in 2024 and $1 million for new condos.

In the condo market, a glut of new microcondos (shoeboxes in the sky) that no one actually ever wanted, sit empty, putting owners sitting on a powder keg of debt with little hope of renting them out as rentals. And a disconnect with the US economy could send Toronto’s commercial and retail real estate sector, which hasn’t really recovered from the pandemic, into a slide.

Once the cascade begins, it may be difficult to slow or halt. The buyer market will disappear. So the question becomes “how far will Toronto and GTA home prices fall?”

The Heavy Weight of High-Rate Mortgages

Those overweight with debt and carrying ballooning mortgage payments are nervous. Some may be able to bail out now before the crash. That might save many foreclosures and bankruptcies (which are going to happen). The government has no handle on this crisis. Their latest ploy of preventing foreign investment and stopping buyers from owning second homes infringes on human rights so they’re sacrificing their future election for the sake of appearing to be doing something.

Trudeau set the immigration limit for 341,000 new immigrants in 2020. In the last two years, 1.7 million immigrants have been pulled in by the Prime Minister and his party, even though there is no jobs or accommodations readied for them.

“For the second time since its inception as a country in 1867, Canada has welcomed over 400,000 new inhabitants in 2021. The country has set a new all-time high for permanent residence landings in a single year. Canada’s immigration levels have been among the highest in the world for decades”  — excerpt from a 2021 financialexpress.com post.

As the summer recovery hits, fewer buyers are active but they’re still able to big up home prices in the GTA. In Calgary especially, the booming energy industry will drive much higher prices. As Calgary draws more inbound residents, homes will be freed up in Ontario.

The End of Buyers

• excessive mortgage qualifying criteria
• severe changes in international trade and supply chains
• consumer’s savings is exhausted — spending will plummet
• inflation will rise, imported products will be expensive
• mortgage rates stay elevated due to Canadian Bank’s perception of risk
• stagflation makes buyers give up completely
• condo buyers can’t sell their units and the prices plummet or they face foreclosure
• new construction in the GTA comes to a standstill
• current new home/condo offerings sit empty
• muncipalities, dependent on real estate fees, face bankruptcy and major restructuring

I correctly predicted that a geo-political shock is the most likely source of the next stock market crash and housing market crash.  However, I didn’t foresee that Trump would be the international agent of collapse. 

However, the win for Trump and the Americans will be short-lived as the full impact of high tariffs hit the US economy. Their economy isn’t prepared for the destruction of the intertwined manufacturing process. They will have difficulty supplying the missing components, materials and specialized talent Canada provides. Trump doesn’t appear to believe this will have much impact. Experts on the Fox network believe the tariffs will have minimal effect on the US economy.

It’s likely we’ll see a stock market crash on Monday, Feb 3rd as investors bail out of a risky situation headed for disaster. This will create a buying opportunity for the prepared investor as stocks hit a buy the big dip moment.

Find out how the Toronto Real Estate market shaping up.   Check out more detailed market updates and forecasts for of Mississauga, Vaughan, Richmond Hill, Aurora, Newmarket, and Bradford.

Toronto Housing Market Crash Factors

What are the economic and real estate market factors that affect your selling decision?

• mortgage rates rise too high to qualify
• refinancing of home debt plunges (already happening)
• US economy falters against global wartime conflict
• GTA economy and employment start to fall quickly — a crisis that brings further negative trends/events
• Canadian consumer debt reaching limits it can’t sustain
• NAFTA agreement conflicts and refusals
• add on taxation by Ontario, city and Toronto governments
• soaring home prices fall due to international conflicts
• moderate new home construction – abandoned security deposits
• government meddling with property use
• mortgage rates rising faster
• multifamily new construction creates too much supply
• number of millennials buying homes drops or house prices are out of reach (simply no way to qualify to buy)
• banks get skittish and refuse to lend in such an environment
• political pressure to keep home prices up to protect homeowner’s equity and credit situations

The final word about this impending housing market crisis is that distrust of Donald Trump is a factor. His bills and intentions are untrustworthy. He announced that the border and drug importation was the issue with Canada and hinted the tariffs would be avoided if Canada fixed those issues and fulfilled and military responsibilities were kept. Yesterday, he said none of that mattered, and the tariffes would not be lifted.

Business needs stability, certainty and freedom for trade, and that has been lost.  Get more insights into the Toronto housing market, and condo market.

Homebuyers are still willing to look beyond the green spaces belt in Aurora, Bradford, Mississauga, and Newmarket first before heading north. Barrie and Innisfil have seen unbelievable rises.