Mounting global economic unease amid US president’s fresh threats against key allies could keep Canadian homebuyers on the sidelines
Economic turbulence and US-Canada trade turmoil essentially poured cold water over a hoped-for Canadian housing market recovery last year – and the opening weeks of 2026 have offered no indication that things will be any calmer this time around.
US president Donald Trump has ramped up rhetoric on international allies yet again in January, threatening new tariffs on those who oppose his efforts to annex Greenland and inflaming tensions with Canada this week.
In the early hours of Tuesday morning, Trump shared an AI-generated image on Truth Social showing the US flag draped across Canada, Greenland, and Venezuela, stirring fears of a revival of the president’s “51st state” rhetoric.
And in a speech at the World Economic Forum in Davos on Wednesday, Trump hit out at Canadian prime minister Mark Carney and said Canada “lives because of the United States” as he directly criticized a slew of allies including France and the United Kingdom.
Economic unease spells bad news for the housing market
US Treasury yields climbed and the stock market slid at the beginning of the week as fears rose of potential US military action in Greenland, recovering slightly on Wednesday after the president ruled out that prospect.
And Trump's vague announcement after his speech that he had reached the "framework" of a deal on Greenland appeared to avert chances of big tariffs on trading partners, for now.
But fresh economic uncertainty and escalating tensions with the US are unlikely to spell good news for the Canadian housing market in 2026, even with some market watchers hopeful of a better year ahead.
The outlook now appears eerily similar to the same time last year, when the threat of huge US tariffs on Canada torpedoed hopes of a housing market uptick.
“Last year, we went into the year thinking that the market was going to move up and then everything south of the border contributed to dampening that growth and making the forecast not really as strong as we hoped it would be,” Joel Fox (pictured top), co-founder and COO of Ownright, told Canadian Mortgage Professional.
“My thinking as we headed towards the end of [2025] was, ‘OK, there’s still a lot of that uncertainty baked into the market but at least that’s becoming a little bit normalized, and people are getting comfortable with that and maybe that might drive people off the sidelines.’
“But I think everything that’s happened so fast in the first part of the year is really going to affect the market, and a lot of those that are optimistic… are maybe not considering the impact that these new geopolitical activities are going to have on the market.”
A resolution to the US-Canada trade dispute is viewed by many as the number one factor that will determine whether the housing market sinks or swims in the coming 12 months.
But there seems little prospect of a rapprochement anytime soon with Carney leaving Davos this week without speaking to Trump, whose speech took place a day after the prime minister’s.
No housing crash in sight – but not a big recovery, either
While Fox doesn’t envisage a sharp downturn for the national housing market this year, he sees plenty of hopeful buyers staying on the sidelines as they wait to see how continuing trade tensions impact the economy.
That means the sluggish pace of home sales seen in December and throughout last year will probably stretch into 2026, he said.
“I would love to say that I think the market’s going to be strong this year and that December was a bit of a blip,” he said, “but I think it would be really hard to fault any Canadian from staying on the sidelines with all the uncertainty that’s at play… obviously very much driven from south of the border.”
Even if there isn’t a fresh escalation on the trade front, Fox highlighted that Trump’s actions this year could damage the US economy, indirectly bruising Canada’s economic outlook too.
Job growth has slowed south of the border during Trump’s term, while inflation remains above the Federal Reserve’s target (it sits at 2.7%, higher than the central bank’s 2% goal).
Financial markets’ jitters this week, meanwhile, suggest they mightn’t take kindly to a concerted push by Trump to seize Greenland, whether by acquisition or force.
“It’s pretty strongly understood that everything that’s being done south of the border is at the very least going to have a near-term negative effect on the US economy,” Fox said. “And when the US economy takes a hit, our economy also takes a hit.”
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