TIMI OLANIYAN

CANADA HOUSING MARKET: STILL WAITING FOR A NATIONAL HOUSING MARKET RECOVERY

National housing sales and the MLS Home Price Index continued to decline in March, reflecting continued weakness in market conditions.

The number of national housing sales posted its fifth consecutive monthly decline last month, edging down by -0.1% (sa figures) from its February level, while it declined by -2.3% (nsa) since March 2025. From February to March, sales declined in 17 of the 31 local markets we track. National new listings also edged down by -0.2% (sa) between February and March and posted a -4.9% (nsa) decline since March 2025.

With almost identical monthly declines (in %) in both sales and new listings, the national sales-to-new listings ratio stayed constant at 47.8% (sa) from February to March, still in the lower half of the estimated balanced conditions range. This indicator of market conditions has hovered in this lower-half range since December 2024, and also frequently since Spring of 2022. From February to March and according to this indicator, market conditions eased in 14 of the local markets we monitor and tightened in 17 of them. It also suggests 14 of these local markets were balanced in March and the same number were favouring buyers, all in B.C. and Ontario. Only 3 markets—Regina, Saskatoon and St. John’s (NL)—were assessed as sellers’ favourable.

The other indicator of market conditions we report—months of inventory—stayed unchanged at 5.0 from February to March, very close to its long-term pre-pandemic average of 5.2, hence also suggesting balanced conditions. But despite being essentially balanced at national level, this indicator continues to mask significant divergences across provinces with British Columbia and Ontario showing figures above their long-term average and the other provinces showing below average figures.

The national MLS House Price Index (HPI) declined -0.4% (sa) from February to March, continuing its downward trend that started in the second half of 2023. As in many previous months, all unit types contributed to both the monthly and 12-month declines in the national MLS HPI. Over the 12-month period ending in March of this year, this price index declined -4.7% (nsa). Its trend profile reflects the weakening market conditions mainly coming initially from the lagged effects from the rise in interest rates until Fall of 2023, and subsequently from slower population growth and the rise in global trade and geopolitical tensions since early 2025.

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

The evolving conflict in the Middle East is causing heightened volatility and US trade policy continues to reshape global trade patterns. Both are ongoing sources of uncertainty. The Bank’s April outlook assumes tariffs remain unchanged and the global benchmark price of oil declines to US$75 per barrel by mid 2027.

The Iran war has led to sharply higher energy prices and transportation disruptions, diminishing growth prospects in oil-importing countries and boosting inflation worldwide. In the United States, growth is still expected to be solid over the projection horizon, boosted by AI-related investment and consumption growth. China’s economy is being supported by robust exports. In the euro area, higher prices for oil and natural gas will weigh on economic activity.

Financial conditions have been volatile, reflecting daily developments in the Middle East and shifting market expectations for inflation and interest rates. Bond yields are modestly higher since January while equity markets, which weakened sharply at the outset of the war, have recovered. Since the start of the war, the US dollar has appreciated against most major currencies. The Canada-US exchange rate has been relatively stable.

Overall, the global economy is expected to grow by about 3% in 2026, 2027 and 2028. Projections for inflation over the next year are revised up because of the jump in energy prices.

• Weaker-than-expected performances in 2025Q4 and especially 2026Q1 have prompted a steep downgrade to our forecasts for 2026 annual average Canadian home resales and price growth. While severe weather in Central and Atlantic Canada weighed on activity early in the year, weakness was also evident in B.C., where conditions were more temperate. Sales are likely to take most of the year to recoup first quarter losses, as housing remains constrained by a subdued economy, heightened uncertainty, and ongoing cost of living pressures.
• Interest rates are expected to be a largely neutral factor for the outlook in 2026, with the Bank of Canada likely to remain on hold and no major movements expected in bond yields (which help determine fixed mortgage rates).
• Canada’s population declined last year for the first time since Confederation, driven by losses in Ontario and B.C.. Softer rental demand and falling rents are discouraging investor activity in both provinces. Alberta stands out, with the strongest population growth nationally, supported by immigration. Interprovincial migrants continue to flow into the province, bolstering ownership demand.

The number of home sales recorded over Canadian MLS® Systems was virtually unchanged (-0.1%) on a month-over-month basis in March 2026.

“Home sales activity remained at lower levels in March, as rising global economic uncertainty, along with a mid-month jump in fixed mortgage rates tied to incoming higher inflation, piled on to an already shaky economic start to the year,” said Shaun Cathcart, CREA’s Senior Economist. “2026 is still expected to see a modest amount of upward momentum in sales and a stabilization in prices as some pent-up first-time buyer demand enters the market, but the forecast for the year has had to be revised downward. The timing of higher mortgage rates, along with the perception they may be temporary, could keep would-be buyers away at the most active time of year – April, May, and June – as they wait for rates to come back down.”

March Highlights:

• National home sales were almost unchanged (-0.1%) month-over-month.
• Actual (not seasonally adjusted) monthly activity came in 2.3% below March 2025.
• The number of newly listed properties edged down 0.2% on a month-over-month basis.
• The MLS® Home Price Index (HPI) fell 0.4% month-over-month and was down 4.7% on a year-over-year basis.
• The actual (not seasonally adjusted) national average sale price was down 0.8% on a year-over-year basis in March 2026.

The provincial budget season is winding down, with just PEI and Newfoundland and Labrador still to table their FY26/27 documents. Here are five themes:

Deep deficits persist: A few provinces are slipping deeper into the red, while a few are moving to slightly shallower shortfalls. As a group, the chunky $40 billion deficit for the fiscal year just ending (FY25/26) will persist in FY26/27, with a combined shortfall of $46.7 billion expected. That’s a manageable 1.4% of GDP, but topped only twice in the past two decades: at the depth of the pandemic, and the depth of the financial crisis.

Certainly uncertain: This year’s budget season acknowledged the wild uncertainty in macroeconomic conditions. But, unlike last year, where every province seemingly took a different approach to setting an economic outlook (assume tariffs, no tariffs, publish different scenarios, etc.), this year was largely based on a ‘normal’ baseline economic outlook and a status quo on trade policy. With that in mind, the group overall has embedded more than $10 billion of contingencies into the FY26/27 fiscal plan, leaving some room for upside if the economy holds up.

Revenue gusher (for some): The two big oil-producing provinces locked in their budgets ahead of the conflict in Iran and associated surge in oil prices. Now, budget assumptions look wildly conservative. Alberta assumed $60.50 for WTI this fiscal year and Saskatchewan assumed $59.80 (Newfoundland & Labrador still to be tabled). At current levels for WTI, the light-heavy differential and the loonie, we could see upwards of $20 billion of revenue upside in those two provinces alone, swinging both well back into surplus.

Debt climbing: The combined provincial net debt-to-GDP ratio is looking to push 32% in FY26/27, which would be a fourth consecutive increase from the post-pandemic lows. Recall that there was meaningful fiscal consolidation during that period when inflation and nominal growth were ripping. Interestingly, debt ratios don’t look any worse than they did a year ago thanks to hefty upward nominal GDP revisions, but the provinces are clearly still open to borrowing. This year’s long-term borrowing program is on pace to run at around $140 billion, just a shade lower than seen over the prior two years and the pandemic high. Indeed, while the combined provincial deficit is running at $47 billion this fiscal year, combined net debt is going to surge by $80 billion, or 2.5% of GDP, which is more reflective of underlying finances. Combined with the federal government, this truer fiscal gap in Canada is closer to 4.5% of GDP.

Policy steady: There were no show-stopping policy changes at the provincial level this budget season. While there were no major tax changes, some provinces nudged taxes higher (e.g., B.C. broadening the PST base and lifting income taxes), while others pushed through some targeted policy (e.g., Ontario expanding the HST rebate on new homes to all buyers). In general, the provinces continue to focus heavily on infrastructure, still catching up to past population growth (hence the hefty borrowing program), while program spending looks to run strong at more than 4% overall. The federal government continues to do more of the stimulus leg work, and that could continue with any new measures announced in the upcoming federal fiscal update.

Although Canada faces near-term hurdles to its plans to increase AI data center infrastructure due to constrained generation and transmission capacity, the country is not out of the race to attract more of the expected capital expenditures on data centers. Many countries are also dealing with similar grid constraints, which means that regions that can adapt their electricity sectors quickly to enable new large loads to connect to supply in a timely manner will come out ahead.

This situation creates an opportunity for Canada to create conditions that can enable faster data center connection to the grid or to off-grid alternatives. The ‘bring your own generation’ model that is being explored by Alberta is one such promising tool. Data center companies in Texas are already opting for this option as it is faster than waiting to be connected to the grid. Also, other regions are considering it as a way to shelter ratepayers from the costs of building new generation and transmission for data centers. Ontario, on the other hand, can lean on its advantage as the first jurisdiction in North America to build a small modular reactor (SMR). One way to do this would be to include SMRs in the new corporate power purchase agreements program, which allows companies to procure their own generation. The proposed 40 GW offshore wind farm in Nova Scotia is another potential generation source that could support a data center industry in Atlantic Canada.

Whatever policies and tools are used, protecting ratepayers from electricity price increases will be important for gaining public support. Governments can look to jurisdictions in the U.S. and elsewhere for lessons on what can be done differently to avoid repeating actions that have contributed to rising retail electricity prices in other markets like the PJM Interconnection.

This week’s data releases and Bank of Canada (BoC) statement describe a world that could have been, with a domestic backdrop that showed signs of easing inflation. The war in Iran has upended that. With escalatory strikes on energy infrastructure this week, WTI oil prices are holding at $94 (as of the time of writing). All the focus is now on how big and persistent the energy shock will be – with the prospect of stagflation looming.

It is unfortunate that households and businesses will face this new pinch, because this morning’s retail sales data sent some positive signals. Real volumes posted a solid gain in January, taking the three-month gain to 7.7% (annualized) and February’s preliminary estimate of the nominal figure showed another solid month could be expected. After a year of fits and starts, it looks like things were just starting to turn a corner. The expected surged in gasoline and energy prices in March will muddy the picture and likely eat into the real spending figures in the months ahead.

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

The war in the Middle East has increased volatility in global energy prices and financial markets, and heightened the risks to the global economy. The breadth and duration of the conflict, and hence its economic impacts, are highly uncertain.

Prior to the war, the global economy was on pace to grow at around 3%, as expected in the January Monetary Policy Report (MPR). Economic growth in the United States has moderated but remains solid, driven by consumption and strong AI-related investment. US inflation remains above target and has evolved largely as expected. In the euro area, domestic demand is supporting growth while exports have contracted. China’s economy continues to be boosted by strength in exports, but domestic demand remains weak.

Since the outbreak of the conflict in the Middle East, global oil and natural gas prices have risen sharply, and this will boost global inflation in the near-term. In addition to energy supply disruptions, transportation bottlenecks stemming from the effective closure of the Strait of Hormuz could impact the supply of other commodities, such as fertilizer. Financial conditions have tightened from accommodative levels. Global bond yields have risen, equity market prices have declined, and credit spreads have widened. The Canada-US dollar exchange rate has remained relatively stable.

While housing costs ease slightly nationally, they remain near historic highs in Ottawa, Montréal and Halifax

For years, we’ve heard that housing affordability in Canada has hit rock bottom. Despite some recent improvements, the new CMHC Housing Affordability Composite Index, launched today, shows it remains a major challenge. But this blanket statement overlooks how much housing affordability has eroded in Ottawa, Montréal and Halifax in recent years.

It’s clear the crisis is no longer limited to Toronto and Vancouver.

Housing affordability is shaped by several factors, not only how much housing is costing. It also includes having enough income to pay rent or a mortgage. It depends on supply and demand factors that determine how easy or hard it is to find a housing unit at a given price. In addition, it considers discretionary income that can be used to make space for a greater housing budget.

While many housing affordability indexes exist in Canada, most are based on a single indicator, resulting in an incomplete picture of the issue. Many also focus only on homeownership affordability, overlooking the rental housing market segment. This approach misses a key component of housing in Canada and the potential interactions between the rental and homeownership market segments.

Highlights:

• Canadian housing affordability posted an eight consecutive improvement in Q4’25. This was the longest streak of improving affordability ever recorded in the country. The mortgage payment on a representative home as a percentage of income (MPPI) fell 0.4 percentage points. Seasonally adjusted home prices rose 0.4% in Q4’25 from Q3’25; the benchmark mortgage rate (5-year term) increased 4 basis points, while median household income rose 0.8%.
• Affordability improved in 6 of the ten markets in Q4. On a sliding scale of markets from best progression to least: Vancouver, Calgary, Toronto, Edmonton, Victoria and Hamilton. On the flip side, Quebec City and Ottawa/Gatineau deteriorated in the fourth quarter, while Montreal and Winnipeg remained unchanged. Countrywide, affordability enhanced by 0.6 pp in the condo portion and 0.4 pp in the non-condo segment.

Housing affordability improved again in the final quarter of 2025, marking an eighth consecutive quarterly gain, the longest streak on record. The mortgage payment as a percentage of income fell to 51.6%, its lowest level in almost four years. Even with the recent improvement, affordability remains well above the long-term average of 40.5% since 2000. The latest progress in affordability came despite a modest increase in national home prices, the first in three quarters. The 5-year mortgage rate reversed the prior quarter’s 4-basis-point increase, declining by the same amount in Q4. This represented the seventh improvement in financing costs in the past eight quarters, offering a slight boost to affordability. With this latest movement, borrowers are financing at rates approximately 22 basis points lower than a year earlier. Income gains, however, contributed more to the improvement in the quarter than changes in interest rates. Although incomes have lagged home price growth in recent years, the gap has been narrowing, and the home-price-to-income ratio now stands at its most favourable level in five years. Affordability trends varied across regions. Vancouver and Calgary posted the largest quarterly declines in the mortgage payment as a percentage of income, helped in part by lower home prices. Toronto also enjoyed a sharp improvement despite the stabilization in home prices. In contrast, affordability worsened in Québec City and Ottawa-Gatineau, where price growth more than offset the impact of higher incomes and lower financing costs. Most of the improvements in the last year have occurred in the markets that were the most stretched, rather than in areas with relatively more affordable housing. This pattern may continue in 2026, as ongoing softness in the Toronto and Vancouver resale markets does not suggest an imminent rebound in prices especially with the ongoing slowdown in population growth. Looking ahead, assuming tepid home price increase changes over the next year at the national level, income growth is expected to remain the primary driver of further improvements in affordability, as interest rates are unlikely to provide much additional support. The Bank of Canada has indicated it is comfortable with its current stance on monetary policy and persistent government deficits worldwide could exert upward pressure on longer-term yields.

CANADA HOUSING MARKET: NATIONAL HOUSING CONDITIONS CONTINUE TO COOL

National unit sales significantly fell from December to January. This weakening in sales combined with a sharp rise in new listings contributed to lower the sales-to-new listings ratio to near the lower bound of the estimated range for balanced conditions. However, unusually inclement weather in Ontario centres contributed to amplify the slowdown in national sales in January.

National sales (in units) posted a -5.8% (sa) drop from December to January. They weakened in each of the last 3 months, posting a cumulative -10.2% decline (with sa figures) since October 2025. In January, they were 16.2% below their level in November 2024, the period when trade tensions started to emerge as the incoming U.S. administration announced its intention to increase tariffs on imports from key economic partners. Compared to the same month in 2025, national sales were 16.2% (nsa) lower in January. Following 4 months of monthly declines, new listings rose sharply in January (7.3% m/m, sa) but fell 6.2% (nsa) from the same month in 2025.

With this significant decline in sales and the sharp rise in new listings from December to January, the sales-to-new listings ratio fell from 51.3% (sa) in December to 45% in January, a 6.3 percentage points (pps) drop. This indicator of housing market conditions now stands very close to our 44.6% estimate for the lower bound of the balanced conditions range. This indicator declined by 4.1 pps (from sa figures) since January of 2025.

Highlights

• According to the 2022 Canadian Housing Survey, one-third (33.3%) of households reported moving to their current residence within the past five years.
• Upgrading to a larger or better-quality dwelling was the most common reason reported by households that moved within the past five years, cited by one in four moving households (25.3%).
• Among households that moved across provinces, employment (42.5%) was the reason cited most often, followed by wanting to be closer to family (27.6%). In contrast, 4.5% of these households reported moving to upgrade to a larger or better-quality dwelling.
• Movements within the same province but to a different municipality showed patterns that resembled aspects of interprovincial migrations and moves within the same municipality, further supporting the relevance of distance in a household’s decision to move.
• Reasons for moving also varied by age of the reference person, and further differences emerged when distinguishing intraprovincial and interprovincial moves.
• Findings suggest that in addition to the motivation to improve housing conditions and quality of life, various life events and stages of life can influence a household’s decision to move.

• Home sales fell 5.8% from December to January, marking the third consecutive monthly decline and the largest drop since February 2025 when U.S. tariffs were announced.
• New listings jumped 7.3% from December to January, their first increase in five months and the largest monthly increase since January 2025.
• Active listings increased by only 0.4% during the month due to a higher number of cancelled listings, likely due to the lack of momentum in the market.
• Market conditions eased during the month but remained balanced at the national level, which largely reflects soft conditions in Ontario and B.C., while markets in all other provinces continue to favour sellers.
• Housing starts dropped by 42.6K from 280.7K in December to 238.0K in January (seasonally adjusted and annualized), a print well below the consensus calling for 262.5K. Starts decreased in urban areas (-50.2K to 218.2K), while they increased in rural areas (+7.6K to 19.9K). In urban centres, the drop stemmed from the multi-unit segment (-51.9K to 177.0K), while the single-detached segment increased slightly (+1.7K to 41.2K). Decreases in housing starts were seen in Montreal (-11.5K to 17.6K), Toronto (-1.3K to 28.4K), and Vancouver (-0.4K to 33.5K), while Calgary (+10.2K to 25.6K) registered an increase.
• The Teranet–National Bank Composite National House Price Index declined by 0.4% from December to January after seasonal adjustment. Seven of the eleven CMAs included in the index recorded declines: Ottawa-Gatineau (-2.4%), Winnipeg (-1.0%), Toronto (-0.9%), Edmonton (-0.9%), Vancouver (-0.7%), Hamilton (-0.5%), and Victoria (-0.1%). Conversely, prices rose in Halifax (+2.0%), Quebec City (+1.6%), Montreal (+1.4%) and Calgary (+0.7%).

The number of home sales recorded over Canadian MLS® Systems fell 5.8% on a month-over-month basis in January 2026.

“The monthly decline in national home sales was driven primarily by less activity in the Greater Golden Horseshoe and Southwestern Ontario, suggesting that the story was probably more about a historic winter storm than a downshift in demand,” said Shaun Cathcart, CREA’s Senior Economist. “Notwithstanding the chilly start to the year, we continue to expect 2026 will ultimately be defined by pent-up demand from first-time buyers finally seeing a chance to enter the market.”

January Highlights:

• National home sales declined 5.8% month-over-month.
• Actual (not seasonally adjusted) monthly activity came in 16.2% below January 2025.
• The number of newly listed properties jumped 7.3% on a month-over-month basis.
• The MLS® Home Price Index (HPI) fell 0.9% month-over-month and was down 4.9% on a year-over-year basis.
• The actual (not seasonally adjusted) national average sale price dipped 2.6% on a year-over-year basis in January 2026.

Similar to what happened in January 2025, new supply jumped on a month-over-month basis in January 2026, rising 7.3% as sellers seemed eager to get the year started.

The burst of new supply was driven by about two-thirds of local markets, and led by Montreal, Quebec City, Calgary, Greater Vancouver, and Victoria. Meanwhile, Central and Southwestern Ontario were far less prominent and, in many cases, recorded declines. This reinforces the view that winter weather was a primary factor in January in those regions, as it appears to have suppressed both demand and supply.