canada housing market forecast 2026

Canada's Housing Market 2026: A Gentle Thaw After a Year-End Slump

As the calendar turns, Canadian homebuyers and sellers are asking one critical question: what does 2026 hold for the housing market? After a turbulent year defined by geopolitical tensions, shifting federal leadership, and cautious consumer sentiment, the market is entering a new phase.

According to the latest reports from the Canadian Real Estate Association (CREA) and major financial news outlets, the market ended 2025 with a whimper rather than a bang. However, preliminary forecasts suggest a gradual recovery is on the horizon, driven by falling interest rates and pent-up demand. This article explores the data behind the trends and what it means for Canadians navigating the real estate landscape in 2026.

The Stagnation of 2025: Setting the Scene

To understand where the housing market is going, we must first look at where it has been. The end of 2025 was not defined by a crash, but by a notable slowdown caused by external economic pressures.

Trade Wars and Economic Jitters

The primary culprit for the market's sluggishness was a cloud of economic uncertainty. As reported by BNN Bloomberg, "Trade war jitters send Canadian housing market into year-end slump." The report notes that national home sales fell nearly 2% in 2025 following trade-war-fuelled uncertainty. This volatility dampened investor confidence and made prospective buyers hesitant to commit to large, long-term financial obligations during a period of geopolitical instability.

The Year-End Numbers

The sentiment wasn't just anecdotal; it was reflected in the hard numbers. Yahoo! Finance Canada highlighted that "Canada's housing market ended 2025 with a whimper: CREA report." This slowdown capped a year that saw lower interest rates—a traditional catalyst for market activity—fail to ignite the usual frenzy. Instead, heightened economic anxiety overshadowed the financial incentives of cheaper borrowing costs.

CBC News further confirmed this trend, noting that "National home sales in Canada declined by 1.9 per cent in December compared to the same period a year earlier." This marked a significant psychological shift; for the first time in recent memory, falling rates were not immediately correlated with rising sales, signaling a more cautious consumer base.

Recent Updates: The CREA Forecast for 2026

As 2026 begins, the narrative is shifting from stagnation to stabilization. The Canadian Real Estate Association (CREA) has released its updated forecast, providing a roadmap for the coming years.

Pent-Up Demand and Sales Momentum

The most significant takeaway from the latest CREA forecast is the expectation of renewed activity. After a stop-start recovery in the latter half of 2025, there is a sense that the market is poised for a gentle thaw.

Economists and real estate professionals anticipate that "pent-up demand is poised to nudge Canadian home sales higher in 2026." The uncertainty that froze decision-making in 2025 is expected to dissipate. As trade tensions ease and the economic outlook stabilizes under new federal leadership, buyers who sat on the sidelines are likely to re-enter the market.

Price Projections: Modest Gains, Not a Boom

Unlike the frenzied price surges of previous cycles, 2026 is expected to bring modest, sustainable growth. The CREA has updated its resale housing market forecast, predicting a more balanced environment.

The national average home price is forecast to edge up, with projections suggesting a 2.3% increase from 2026 into 2027. This growth will not be uniform across the country. Provinces like Saskatchewan and Quebec are expected to see slightly larger gains, while other regions will likely experience growth in the 1% to 2.5% range. This indicates a cooling of the overheated markets in major urban centers and a potential rebalancing toward more affordable regions.

Contextual Background: The Forces Shaping 2026

To fully grasp the 2026 forecast, one must consider the broader economic and social context influencing the housing market.

The Interest Rate Pivot

The primary driver for the 2026 outlook is the shifting interest rate environment. After years of aggressive hikes to combat inflation, the Bank of Canada has pivoted. Economists expect a gradual housing recovery in 2026 as lower interest rates support demand.

However, this recovery is occurring within a new reality. While rates are coming down, they are not expected to return to the ultra-low levels of the past decade. This means affordability remains a significant constraint. The "cheap money" era that fueled the 2021 boom is over, replaced by a market where buyers must qualify at more stringent stress tests.

Supply Challenges and Immigration

Canada’s housing shortage remains a structural issue. Despite a slowdown in construction starts during 2025 due to high material costs and labor shortages, demand continues to outstrip supply in many markets.

Furthermore, immigration levels play a pivotal role. While federal policies have seen adjustments, Canada remains committed to welcoming hundreds of thousands of newcomers annually. This steady influx of population creates a baseline of demand that prevents significant price drops, particularly in major metropolitan areas like Toronto and Vancouver.

A Change in Leadership

The political landscape is also shifting. As noted in supplementary research, the market is navigating a change in federal leadership. New policies regarding housing affordability, foreign investment, and taxation could significantly impact market dynamics. Stakeholders are closely watching for initiatives aimed at increasing housing supply, such as the removal of red tape for developers and incentives for purpose-built rentals.

Immediate Effects: The Current Market Reality

The transition from 2025 to 2026 is creating immediate ripple effects across the economic spectrum, from first-time buyers to seasoned investors.

The Buyer’s Dilemma: Affordability vs. Opportunity

For prospective homeowners, 2026 presents a complex dilemma. On one hand, mortgage rates are trending downward, making monthly payments slightly more manageable. On the other hand, home prices remain historically high.

The "wait-and-see" approach that characterized the latter half of 2025 is slowly eroding. Real estate agents report that clients are increasingly aware that waiting for prices to drop significantly may be a losing strategy. Instead, the focus is shifting toward "buying down" the rate—purchasing a home now and refinancing when rates drop further.

The Rental Market Surge

As buying remains challenging for many, the rental market continues to bear the brunt of housing demand. High mortgage costs have forced would-be buyers to remain tenants, driving up rental rates and competition for available units. This has spurred interest in alternative housing models, including co-living arrangements and secondary suites, as Canadians seek creative ways to manage costs.

Regulatory Shifts

Recent regulatory changes are also having an immediate effect. Stricter stress tests and mortgage qualification rules introduced in previous years remain in place, ensuring that borrowers are not over-leveraged. However, there is growing discussion about loosening restrictions on secondary suites and modular housing to accelerate supply.

Future Outlook: Navigating 2026 and Beyond

Looking ahead, the consensus among economists and analysts is one of cautious optimism. The wildcards remain global trade relations and the speed of interest rate cuts.

Strategic Implications for Stakeholders

• For Buyers: 2026 may offer a "sweet spot" for those with stable employment and a solid down payment. As pent-up demand returns, competition will likely increase, potentially driving prices up faster than anticipated. Buyers should focus on affordability rather than trying to time the absolute bottom of the market.
• For Sellers: The days of listing a home and expecting 20 offers over asking price are likely gone for the foreseeable future. However, the CREA’s forecast of modest price growth suggests that well-priced homes in desirable locations will still sell. Patience will be key, as the days on market may be longer than in previous years.
• For Investors: The focus is shifting from speculative flipping (buying, renovating, and selling quickly) to long-term cash flow. With rental demand high, income-generating properties remain attractive, though regulatory scrutiny on short-term rentals is intensifying in major cities.

The "Soft Landing" Scenario

The most probable scenario for 2026 is a "soft landing." This involves a period of stabilization where prices neither crash nor skyrocket, and sales volume gradually recovers. This stability is healthy for the broader economy, as it allows wages to catch up to home prices and prevents the boom-bust cycles that have plagued the market in the past.

However, risks remain. A resurgence of inflation could force the Bank of Canada to pause rate cuts, dampening the recovery. Conversely, a sharper-than-expected economic downturn could lead to job losses, impacting mortgage affordability and demand.

Conclusion

Canada’s housing market is entering 2026 on