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The Canadian Real Estate Association (CREA) has downgraded its housing market forecast following a jump in fixed mortgage rates and weaker than expected housing sales in the first three months of 2026.
CREA had been forecasting higher sales based on the idea that pent-up demand would emerge, especially from first-time buyers.
But in the second half of March, inflation caused by a spike in oil prices raised the odds of a Bank of Canada rate hike, which raised bond yields and caused a jump in fixed mortgage rates.
“Unfortunately, as it pertains to the forecast, we’ve had to change that and lower it because of the situation in the Middle East and the oil shock,” CREA senior economist Shaun Cathcart told CBC News.
CREA says the non-seasonally adjusted national average home price was $673,084 in March, down 0.8 per cent from the same month last year. The MLS Home Price Index fell 0.4 per cent month-over-month, marking the 16th consecutive month of declines.
Prices remained down on a year-over-year basis in B.C., Alberta, and Ontario, offsetting rising prices in other provinces.
RBC senior economist Claire Fan says the Bank of Canada’s decision to hold interest rates steady was ‘perhaps the least interesting part’ of its Wednesday announcement, as the central bank described an uncertain economic future caught between the potential for higher oil revenues and the threat of damage from inflation.
‘Global disasters’ continue
Cathcart says the timing of the higher mortgage rates, along with the perception that they could be temporary, might keep buyers away this spring, which is typically the busiest time of year.
He says the bottom for home prices is likely to be “right around the corner,” but now that “we’re no longer at the bottom” on interest rates, many buyers will continue to play the waiting game.
Cathcart says buyers are grappling with the uncertainty of how world events like the U.S. and Israel’s war with Iran will impact global economies — putting them in a similar position to last year, when Canada faced a series of major U.S. tariff announcements.
“It’s not a matter of getting a forecast wrong. It’s a matter of these massive global disasters, really, that continue to unfold,” Cathcart said. “I think we just have to cross our fingers that maybe this is the last big one for a while.”
The number of home sales recorded over Canadian MLS Systems remained almost the same, dropping 0.1 per cent on a month-over-month basis in March, while actual (not seasonally adjusted) monthly activity came in 2.3 per cent below March 2025.
CREA says 167,524 properties were listed for sale on all Canadian MLS Systems at the end of March, which was up one per cent from a year earlier but 10.6 per cent below the long-term average for that time of year.
Growth still expected for 2026
Despite the downward revision, CREA still expects the national average home price to rise 1.5 per cent on an annual basis to $688,955 in 2026.
The forecast calls for virtually no growth in B.C., Alberta and Ontario, as well as gains in the two- to five-per cent range in other provinces.
CREA is also predicting one per cent increase in sales for 2026 overall.
That gain is expected to be driven largely by B.C. and Ontario, while sales are expected to rise modestly or decline in other provinces.
Shaun Cathcart, senior economist at the Canadian Real Estate Association, says the ‘missing middle’ remains a major problem in Canada’s housing market.
In 2027, CREA expects average home prices to edge up by 0.9 per cent to $695,094, while it expects national home sales to climb a further 2.1 per cent.
CREA says its sale and price forecasts could be revised upward if the current oil shock is short lived.
