The Canadian Real Estate Association (CREA) has adjusted its housing market outlook due to increased fixed mortgage rates and lower-than-anticipated housing sales in the initial quarter of 2026. Initially, CREA had projected elevated sales banking on the assumption of pent-up demand, particularly from first-time purchasers.
However, towards the end of March, inflation triggered by a surge in oil prices heightened the likelihood of a Bank of Canada interest rate hike. This development led to higher bond yields and a subsequent rise in fixed mortgage rates. Consequently, CREA’s senior economist, Shaun Cathcart, informed CBC News about the revision in the forecast due to the Middle East situation and the impact of the oil shock.
In March, the national average home price, as per CREA, stood at $673,084, showing a 0.8% decline compared to the same period last year. Additionally, the MLS Home Price Index dropped by 0.4% on a monthly basis, marking the 16th consecutive month of decreases. While home prices slumped year-over-year in British Columbia, Alberta, and Ontario, they surged in other provinces, balancing the trend.
Cathcart highlighted that the timing of the higher mortgage rates, coupled with the belief that they might be temporary, could deter buyers during the spring season, typically the busiest time for real estate transactions. He suggested that the bottom for home prices might be near, but the escalated interest rates could prompt many buyers to adopt a wait-and-see approach.
Buyers are apparently apprehensive about the potential impact of global events like the conflict between the U.S., Israel, and Iran on the world economies, reminiscent of the uncertainties faced in the previous year due to major tariff announcements by the U.S. Cathcart underscored the unpredictability posed by ongoing global disasters and expressed hope that current challenges might represent the peak, at least for the near future.
Despite the downward revision, CREA anticipates a 1.5% annual increase in the national average home price to reach $688,955 in 2026. Notably, minimal growth is projected for British Columbia, Alberta, and Ontario, with gains expected in the range of two to five percent in other provinces. CREA also forecasts a one percent rise in overall sales for 2026, primarily driven by British Columbia and Ontario, while other provinces may witness modest sales growth or decline.
Looking forward to 2027, CREA foresees a slight uptick of 0.9% in average home prices to $695,094, accompanied by a further 2.1% increase in national home sales. CREA indicated that its sales and price predictions could be revised upward if the current oil shock proves to be short-lived.