Residential Market Commentary - CUSMA Renewal Rejected

To the surprise of no one the United States has decided it does not want to renew the Canada-United States-Mexico Agreement (CUSMA).  The formal announcement came on July 1 – Canada Day – as per the deadline laid-out in the deal. 

So far, the U.S. has not threatened to leave the agreement (neither have Canada nor Mexico), which would require six-months’ notice.   

Now the trade agreement will be subject to annual reviews until it expires in 2036, consistent with the ‘management-by-mayhem’ style of the current American administration. 

So, uncertainty continues and for those who build and those who buy homes it can be the most challenging problem to overcome. 

Planning new projects requires a long-term, multi-year view of construction costs, financing conditions, and buyer demand.  While the continuation of CUSMA largely shields Canada’s builders and developers from the effects of tariffs on softwood lumber, steel and aluminium any deterioration of those exemptions during the ongoing negotiations would increase input costs.  Uncertainty also translates into increased risk, and risk carries its own price tag.    

For buyers, affordability is a top concern.  Any increase in housing costs will compound uncertainties about employment, inflation and interest rates, likely keeping more buyers on the sidelines. 

For policymakers the response has been to hold interest rates steady.  Most market watchers expect that to continue and they are shifting their forecasts in favour of rate cuts, next year.