Canadian Housing Market Faces Challenges as Prices Drop and Sales Decline

📅 5 days ago

The Canadian housing market is experiencing a notable decline in both prices and sales, with implications for buyers and developers alike. As mortgage rates rise and affordability issues persist, experts forecast continued challenges in the coming years.

In September, the Canadian housing market witnessed a decrease in home prices, prompting a notable drop in residential sales. Homebuyers reacted to the falling prices by purchasing fewer homes, with September recording 36,657 residential sales, marking a 7.7% decline compared to the same month the previous year. After seasonal adjustments, sales also fell by 2.3% from August, indicating that the downturn extends beyond typical seasonal fluctuations. The Canadian Real Estate Association (CREA) provided revised figures for these sales, which are critical for understanding market trends.
The national benchmark price for homes saw a 0.4% decrease in September, landing 3.4% lower than in the same month last year. The average sale price also fell, dropping 1.6% year-over-year to $666,538. It's important to note that the benchmark price reflects comparable housing attributes, while the average price can fluctuate based on the types of homes sold.
CREA attributes the weaker market outlook to an increase in fixed mortgage rates and ongoing uncertainty surrounding variable rates. Their October forecast suggests potential inflation risks tied to energy prices, alongside a more hawkish stance from the Bank of Canada. The prospect of a return to lower borrowing costs seems increasingly unlikely, leaving potential buyers in a precarious situation where they may negotiate lower purchase prices but still face mortgage payments that exceed their capacity.
Though the asking prices have decreased, lenders have not necessarily adjusted their lending criteria, making it challenging for buyers to capitalize on any discounts. CREA reported that there were slightly over 200,000 homes for sale at the end of September, a modest increase of 1.8% from the previous year, which aligns closely with historical norms. The inventory levels indicate that Canada had 4.9 months of inventory after seasonal adjustments, with notable variances across provinces: British Columbia recorded 7.0 months, Manitoba 2.4 months, and Saskatchewan 3.4 months, while Ontario stood at 4.7 months.
The sales-to-new-listings ratio in Ontario was only 41.9%, despite having fewer months of inventory compared to British Columbia, highlighting the competitive dynamics in different regions. Buyers searching for specific property types, like apartments, may find less competition compared to those looking for detached homes, which can influence their purchasing decisions.
Looking ahead, CREA forecasts a slight increase in the national average sale price to $681,681 by 2026, but Ontario is expected to see a decline of 3% to $809,334, with British Columbia projected to drop 0.8%. In contrast, Newfoundland and Labrador are expected to witness the highest average price growth of 5.7% this year.
In the Greater Toronto area, the benchmark price was reported to be 14.7% lower than in September 2021. Other regions, such as Hamilton-Burlington and Calgary, showed varying trends, with significant price increases in Calgary (24.6%) and Quebec City (54.4%). For homeowners in struggling Ontario markets, waiting for better sale prices has not guaranteed improved equity, as financing options become more costly.
Developers are now faced with the challenge of competing against the prices of existing homes, which can limit their revenue potential for new projects. CREA's data does not encompass presales or construction costs, leaving uncertainty about which projects will advance amid these conditions. Despite a forecasted rebound in sales to 444,530 in 2026 and 464,235 in 2027, the anticipated recovery still falls short of the activity seen in 2025.
In conclusion, while buyers may find better prices this fall, they remain burdened by the implications of higher mortgage payments. CREA's September statistics and housing forecast, released on October 16, 2026, continue to reflect the evolving landscape of the Canadian housing market, emphasizing that the factors impacting demand are complex and intertwined with broader economic trends.

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