Finding a New 'Normal'
Canada’s housing market remained balanced overall in October, and the market appears to be settling into its new post-pandemic/post-correction normal. With the exception of a few select areas that are still struggling (e.g., Southern Ontario, namely condos, and parts of B.C.), and some others that are very strong, we’re seeing sales volumes at very ‘normal’ levels, mortgage rates back around neutral and national prices very stable.
Existing home sales rose 0.9% in seasonally-adjusted terms in October, but were still down 4.3% from year-ago levels. The volume of resale activity is effectively back into the range of what was ‘normal’ before the pandemic. Of course, this is set against new sales that are plumbing lows across a number of markets. New listings dipped 1.4% in the month, and were up 4.3% from a year ago. That allowed the sales-to-new listings ratio to improve slightly to 52.2%, reflecting very balanced overall national conditions.
Balanced conditions have left the national benchmark price effectively flat for the past six months. On a seasonally-adjusted basis, prices were up 0.2% in October, but still down 3% from a year ago, and more than 17% below peak early-2022 levels. This has transitioned from a steep correction to a long and slow grind for Canadian home prices, and we suspect that will continue into 2026.
Meantime, as broader market conditions become very neutral, so have Canadian mortgage rates. Most mortgage rates are now bouncing around the 3.75%-to-4.25% range, depending on the term. We continue to view this as a very neutral level of borrowing costs that buyers and investors should be budgeting for over a longer time horizon. As such, we also see little room for improvement barring another serious leg down for the economy. Market pricing currently has the Bank of Canada on hold at these levels through 2026; and our year-end 2026 call for 5-year yields leaves little downside for 5-year fixed mortgage rates. In other words, barring an economic or inflation surprise, these are about the borrowing costs that the market will have to price itself off.
Here’s a quick rundown of local market conditions:
Southern Ontario is still the weak spot, but conditions are gradually getting less bad (outside the new condo space). Indeed, new condo sales have all but dried up, and the resale market is still having a hard time clearing given little forced selling, but still-tough affordability from the perspective of buyers. This will take some further gradual price declines, or time for incomes to catch up. Sub-4% mortgage rates have helped the cause, but we’d need to see more downside to really get the market to turn the corner. Apartment prices are down as much as 10% to 15% from a year ago in areas from Hamilton to London, while single-detached prices are faring less bad.
Vancouver and some other markets across B.C. remain soft alongside elevated inventories, but they’ve become less-so in recent months. Vancouver is back in balanced market territory with the sales-to-new listings ratio at 42%, but both condo and detached prices are down 4% to 5% from a year ago.
Markets in Quebec and further east remain tight almost across the board. Price gains in those regions are firm, led by an 18% y/y jump in Quebec City, 7% y/y in Montreal and 9% y/y in Moncton.
Calgary has really balanced out after a strong run, with a lot of the compelling affordability/investor arbitrage (i.e., from Toronto to Calgary) now priced out. Sales are down 12% from a year ago, and prices are off 2%. Edmonton and the rest of the Prairies remain quite firm.