Canada's national housing market conditions eased significantly in January 2025 with sales declining and new listings posting a near-record monthly rise, noted Scotiabank.

The national MLS House Price Index stayed essentially unchanged in January.

In January, market conditions -- as reflected by the sales-to-new listings ratio -- eased in 27 of the 31 markets the bank tracks from December 2024 to January 2025.

Canada's housing market has been on a recovery path since about spring of 2024, with sales rising, and eventually in October and November, enough to dominate the impact on conditions-the sales-to-new listing ratio-from the upward trend in new listings, stated Scotiabank.

The observed dynamics for housing sales and prices based on the bank's macro-econometric model of the Canadian and United States economy was broadly consistent with what was seen over history following the beginning of an easing cycle for monetary policy.

Based on this Scotiabank Economics model, housing transactions first react, and prices improve with a delay.

The bank's view based on this model was that Canada would witness a "healthy" level of housing activity in 2025 from improved affordability conditions with the decline in mortgage rates and prices that stayed relatively flat over 2024. From this -- and supported by simulations with Scotiabank's model -- it viewed a sustained upward trend for the MLS HPI as imminent, however modest initially given downward pressures from slower population growth due to the recent changes in the government's immigration policy.

The increased uncertainty generated by tariff policy announcements by the new U.S. administration has affected housing markets in January, it pointed out. This is supported by the statement in the CREA report that the weakness in sales came mostly from the last week of the month, at a time when governments, businesses and households in Canada were waiting for potential drastic increases in tariffs imposed on U.S. imports from Canada and other countries.

This uncertainty is still present and could stay for an extended period, added Scotiabank. Even though housing market fundamentals suggest a healthy level of activity in 2025 and the MLS HPI recovering, this increased uncertainty is weighing on the economy and housing demand.

The bank's view is that the implemented tariff package will end up less severe than recent announcements, but this uncertainty could slow housing demand and price growth, at least in the near term. Economic and housing conditions would deteriorate if the U.S. tariff package is more severe than Scotiabank expects inits most recent outlook.