Canada’s Housing Market Enters a Period of Adjustment This Autumn

Canada’s housing market may be heading into a weaker period this fall, with economists expecting prices and sales momentum to decline. The market had shown signs of a developing recovery after several months of improving sales, but the latest data suggests that this momentum is beginning to fade. Nationally, home sales fell 0.7 per cent in August compared with July, while home prices remained unchanged.

Economists are now expecting home prices to decline somewhat over the coming months. Forecasts that previously called for modest price growth have been revised, with prices now expected to remain flat in 2027 rather than increase by one per cent. Stronger price growth is not expected until 2028, when prices could rise by approximately three per cent.

The decline in August sales also ended a five-month streak of increases, reversing some of the recovery seen earlier in the year. Home sales are now at approximately the same level as they were in May and remain 11.2 per cent below their 10-year average. Ontario played a major role in the decline, with sales falling 3.1 per cent and offsetting increases recorded in provinces such as Quebec and Saskatchewan.

Economic uncertainty, particularly related to trade tensions with the United States, may also be affecting buyer confidence. Rising bond yields are another concern because they influence fixed mortgage rates. Although higher yields have not yet had a major impact on the Canadian housing market, some buyers have been choosing variable-rate mortgages or relying on previously approved mortgage rates to avoid higher borrowing costs.

Mortgage rates are expected to continue increasing as they catch up with higher bond yields, which could make homeownership less affordable and push some buyers out of the market. Variable-rate mortgages may also become less attractive if the risk of an interest-rate increase grows. As a result, housing demand is expected to weaken this fall, particularly in Ontario and Quebec, where concerns about potential tariffs on industries such as automobiles and steel could create additional economic uncertainty.