The Canadian Real Estate Association (CREA) has adjusted its housing market prediction downward due to a surge in fixed mortgage rates and lower-than-anticipated housing sales in the first quarter of 2026. Initially, CREA had anticipated increased sales, especially from first-time buyers, driven by pent-up demand. However, a spike in oil prices leading to inflation in late March heightened the likelihood of a Bank of Canada rate hike, resulting in elevated bond yields and subsequent fixed mortgage rate increases.
The national average home price in March, as reported by CREA, stood at $673,084, representing a 0.8% decline from the same period last year. Additionally, the MLS Home Price Index decreased by 0.4% on a monthly basis, marking the 16th consecutive month of declines. Notably, price reductions persisted year-over-year in British Columbia, Alberta, and Ontario, offsetting price hikes in other provinces.
Shaun Cathcart, CREA’s senior economist, highlighted that the timing of the elevated mortgage rates, coupled with the belief that they might be temporary, could deter buyers during the typically busy spring season. While Cathcart suggested that the price floor for homes may be nearing, the shift away from record-low interest rates could prompt many buyers to adopt a wait-and-see approach.
Cathcart emphasized the ongoing uncertainty surrounding global events such as the conflict between the U.S. and Israel with Iran, paralleling the challenges faced in the previous year with significant U.S. tariff announcements impacting Canada. Despite the revision in forecasts, CREA still projects a 1.5% annual increase in the national average home price to reach $688,955 in 2026. Growth expectations vary across provinces, with projections of minimal to moderate sales increases, particularly in British Columbia and Ontario, while other regions may experience modest growth or declines in sales.
Looking ahead to 2027, CREA anticipates a marginal 0.9% uptick in average home prices to $695,094, alongside a 2.1% increase in national home sales. CREA notes the potential for upward revisions in its sales and price forecasts should the current oil shock prove to be short-lived.
