Canadian home sales fall again as CREA cuts 2026 forecast

Explainer

The Canadian Real Estate Association has downgraded its forecast for 2026 home sales for the third straight quarter, now expecting a 5.2 percent annual decline.

"After a four-month run of modestly positive progress on demand, supply, and prices, many of Canada's housing markets took a step back in September," said CREA senior economist Shaun Cathcart.

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National home sales fell 2.3 percent in September from August, following a drop of 0.7 percent in August.

Sales were down 7.7 percent compared to September 2025.

The number of newly listed properties fell by 1.8 percent on a month-over-month basis, after a rebound in August.

New supply has generally been falling since September 2025, according to CREA.

What is happening with home prices?

The average national home price was $666,538 in September, down 1.6 percent from a year earlier.

CREA's Home Price Index, which tracks typical homes, edged down 0.4 percent from August and was 3.4 percent lower than in September 2025.

The association now projects the national average price will tick up just 0.2 percent for all of 2026 to $681,681.

This is about $5,000 lower than predicted in the summer.

CREA now expects a total of 444,530 homes to be sold by the end of this year.

Why are sales and prices under pressure?

CREA says higher fixed mortgage rates, driven by soaring oil prices and bond yields since the spring, are weighing on the market.

"This was hardly surprising given the latest jump in fixed mortgage rates, and with the Bank of Canada now widely expected to follow with a rate hike before the end of the year," Cathcart said in a news release.

He said growing anxieties about further interest rate hikes to combat inflation are expected to keep potential buyers on the sidelines in the last months of the year.

"We've been on this roller-coaster for two years now," Cathcart said, referring to hurdles presented by U.S. tariffs and rising lending rates. "Now it's the uncertainty, and I think a lot of people are going to resist jumping in this fall because of that."

Real estate company Royal LePage says the fall housing market has proven softer than expected.

"The chaotic nature of language coming out of Washington is directly impacting people's willingness to make large financial decisions like buying a home," said Royal LePage president and CEO Phil Soper.

He said prospective buyers remain cautious about making a massive purchase amid so much global uncertainty.

Which markets are cooling off?

Cathcart says markets in Vancouver and Toronto were particularly weak in September.

But markets in the Prairies, Quebec and on the East Coast, which have been hot for quite some time, have also started to cool off.

"Now everyone's going to have to take a breather, I think, until we find out what interests are going to do next year," Cathcart said.

The seasonally adjusted sales-to-new listings ratio for residential properties slipped to 48.8 percent in September from 49.1 percent in August.

This moves the ratio further below the long-term average of 54.7 percent.

What does CREA expect for next year?

Despite the downgrade, CREA is predicting that home sales will pick up next year.

Based on an optimistic outlook where the Bank of Canada makes limited rate changes and borrowers get more certainty about lending rates, CREA predicts home sales will tick up by 4.4 percent in 2027.

The Bank of Canada is not expected to raise interest rates at its next monetary policy decision announcements on Oct. 28.

However, money markets are pricing in a rate hike of 25 basis points in December.

"With housing affordability already stretched, the big question going forward is how much farther will the bank have to go to keep a lid on inflation next year?" said Cathcart. "Until that becomes clearer, this fresh round of uncertainty will likely send some buyers back to the sidelines."

Yadude Books reported in October that Calgary home sales and prices also dipped in September.

With files from CBC News, The Globe and Mail and Yahoo News