The Canadian Real Estate Association (CREA) has revised its housing market projection downward due to an increase in fixed mortgage rates and lower-than-anticipated housing sales in the initial quarter of 2026. Initially, CREA had anticipated heightened sales, primarily driven by pent-up demand, especially from first-time homebuyers. However, in late March, inflation triggered by a surge in oil prices heightened the likelihood of a Bank of Canada rate hike, subsequently elevating bond yields and causing a surge in fixed mortgage rates.
Shaun Cathcart, CREA’s senior economist, informed CBC News that adjustments to the forecast were necessary due to the Middle East situation and oil price shock impacting the market. In March, the national average home price, as per CREA, stood at $673,084, showing a 0.8% decline from the same month the previous year. Concurrently, the MLS Home Price Index witnessed a 0.4% month-over-month decrease, marking the 16th consecutive month of declines.
While prices continued to decrease year-over-year in British Columbia, Alberta, and Ontario, other provinces experienced rising prices, balancing the overall market. The rise in mortgage rates, coupled with uncertainties regarding their temporary nature, may deter buyers during the spring season, traditionally the peak period for real estate transactions. Cathcart noted that although the bottom for home prices may be imminent, the shift away from the lowest interest rates could prompt many buyers to adopt a wait-and-see approach.
Buyers are grappling with global uncertainties, such as the U.S. and Israel’s conflict with Iran, which could impact worldwide economies. Cathcart likened the current situation to the challenges faced last year when Canada confronted significant U.S. tariff announcements. CREA reported that the number of home sales across Canadian MLS Systems remained relatively stable, with a slight 0.1% month-over-month decline in March compared to March 2025.
Despite the revised forecast, CREA still anticipates a 1.5% annual increase in the national average home price to reach $688,955 in 2026. While minimal growth is expected in British Columbia, Alberta, and Ontario, other provinces are projected to witness gains ranging from two to five percent. CREA also foresees a one percent overall increase in sales for 2026, primarily driven by British Columbia and Ontario, with varying sales trends anticipated in other provinces.
Looking ahead to 2027, CREA projects a modest 0.9% uptick in average home prices to $695,094, alongside a further 2.1% increase in national home sales. The association indicated that its sales and price forecasts could be adjusted upwards if the current oil shock proves to be short-lived.
