January homes sales in the Toronto area dropped by nearly eight per cent compared with January 2024, but prices crept up slightly as more buyers entered the market for single-family homes. Now that the Bank of Canada has cut interest rates six times since June, the average five-year fixed mortgage rate is around 4 per cent, down from about 5 per cent a year earlier. A growing number of homebuyers will take advantage of lower borrowing costs as we move toward the 2025 spring market, resulting in increased transactions and a moderate uptick in average selling prices. The forecast for the spring market is far from clear thanks to the lingering uncertainty of a trade war with the United States. Bank of Montreal released on Monday a revised outlook that forecasts a full percentage of additional rate cuts if Trump were to impose his threatened tariffs, on top of the 50 basis points of cuts already in the lender’s baseline economic forecast. We expect that sales will be higher in 2025 than 2024 however the positive impact of lower mortgage rates could be reduced, at least temporarily, by the negative impact of trade disruptions on the economy and consumer confidence.