The Canadian Real Estate Association (CREA) has revised its housing market outlook due to an increase in fixed mortgage rates and weaker housing sales in the first quarter of 2026. Anticipated higher sales, particularly from first-time buyers driven by pent-up demand, were not realized.
Inflation triggered by a surge in oil prices towards the end of March led to speculation of a Bank of Canada rate hike. This raised bond yields and subsequently pushed fixed mortgage rates higher. Shaun Cathcart, CREA’s senior economist, mentioned that the situation in the Middle East and the oil shock forced a downward adjustment in the forecast.
In March, the national average home price, as per CREA, was $673,084, showing a 0.8% decline from the previous year. The MLS Home Price Index dropped by 0.4% on a monthly basis, marking the 16th consecutive month of decreases. While prices decreased in British Columbia, Alberta, and Ontario year-over-year, other provinces witnessed rising prices.
Cathcart noted that the timing of the mortgage rate increase and the belief that it might be temporary could deter buyers during the peak spring season. Although the bottom for home prices is expected soon, the shift in interest rates may prompt buyers to adopt a wait-and-see approach. Global uncertainties, such as the U.S. and Israel’s conflict with Iran, are adding to buyer hesitancy.
Despite the challenges, CREA still projects a 1.5% annual growth in the national average home price to reach $688,955 in 2026. While minimal growth is forecasted for certain provinces, others may experience gains ranging from two to five percent. CREA also anticipates a 1% overall increase in home sales for the year, primarily driven by British Columbia and Ontario.
Looking ahead to 2027, CREA expects average home prices to increase by 0.9% to $695,094, with national home sales projected to rise by 2.1%. The association mentions that if the current oil shock is short-lived, their sales and price forecasts may be revised upwards.
