Housing markets are much like the weather; if you don't like it today, be patient; it will come back to your level of satisfaction soon enough. "Canada’s housing market took a visible step backward in September after months of tentative progress," says Rachel Battaglia, economist at RBC Economics. "Resales fell 2.3% from August seasonally adjusted, interrupting the improvement emerging in the spring." Two factors weighed on September's slowdown, says Battaglia. "The intensifying Canada/US trade war rattled fragile consumer confidence that was starting to rebuild, while anticipation of a Bank of Canada interest rate increase pushed fixed mortgage rates slightly higher, prompting prospective homebuyers to pause, (and) labour markets softened simultaneously adding to buyer hesitation," she says. In an attempt to lure buyers into the market, sellers lowered prices. "Pullback in buyer activity accelerated price declines for the first time in seven months," says Battaglia. "The MLS Home Price Index tumbled 0.4% from August and 3.5% below a year ago, rolling prices back to (what they were) in early 2021." The number of sellers in the market also fell, with new listings retreating 1.8% in September, month-over-month, with lower supply offering some protection against steeper price falls. "September’s decline reflects the bumpy recovery we’ve been expecting as households navigate shifting trade policy and rising borrowing costs," says Battaglia. "Bond yields have already begun climbing in anticipation of Bank of Canada rate hikes, pushing fixed-rate mortgage rates higher before the central bank moves."."That said, the scale of this cycle matters. We look for the Bank of Canada to hike the overnight rate by a total one percentage-point in 2027, a far cry from the last tightening cycle when the rate shot up from 0.25% to 5% in just over a year. Moreover, those rate hikes are likely still contingent on an improving Canadian economy." The next Bank of Canada rate announcements are Oct. 28 and Dec. 9 and "While rate hikes would certainly still squeeze affordability for some would-be buyers this time around, the gradual pace shouldn’t trigger the same magnitude of pullback in post-pandemic resales as before," says Battaglia. "Still, September made clear the market will face rough patches as rates climb and trade uncertainty lingers." Greater Vancouver, the Greater Toronto Area and other metros in BC and Ontario were the hottest markets in Canada during the boom that started during the pandemic and had the greatest distance to fall, says Battaglia. "In the Greater Toronto Area, resales fell 5.3% month-over-month, while Greater Vancouver declined 6.2%. Victoria’s market was even more severe with resales collapsing 25% month-over-month, the sharpest decline in the country," she says, adding, "the fall didn’t have a dramatic effect on prices though. New listings continued to slide for most Ontario markets and Vancouver, keeping supply and demand relatively stable.".Parts of the Prairies are seeing market dynamics loosen as waning resales in Winnipeg, Regina, Saskatoon and Edmonton allow the sales-to-new listings ratio to float lower, though still favouring sellers in most cases. In Calgary, September sales were little changed from August, supported by strong single-family home sales, while listings rose, reducing the sales to new home ratio to 49%. In Quebec, sales plateaued while new listings crept higher, putting downward pressure on prices, says Battaglia. "Montreal is showing the first signs of strain, while Quebec City remains mixed, but vulnerable," she says. "We expect prices to soften further as future rate hikes squeeze buyers, pricing them out of markets where affordability has seldom improved from all-time worst levels." "Atlantic Canada is a mixed picture, with some markets showing signs of tapping out as prices remain near record levels, while Halifax and Newfoundland and Labrador have seen resales climb since April, pointing to stabilization after weakness since late 2025." The foundations for gradual stabilization are in place heading into 2027, says Battaglia. "We see demand gaining ground as labour markets regain footing, and pent-up demand begins to seep out," she says. "That said, the path won’t be linear. Trade policy uncertainty continues to weigh on household and business confidence, while geopolitical tensions keep energy costs unusually high."
