The Canadian Real Estate Association (CREA) has adjusted its housing market outlook after an increase in fixed mortgage rates and lower-than-anticipated housing transactions in the initial quarter of 2026. CREA had previously projected heightened sales, assuming a surge in demand, particularly from first-time purchasers.
However, a rise in inflation towards the end of March, triggered by escalating oil prices, heightened the likelihood of a Bank of Canada rate hike. Consequently, bond yields surged, leading to a spike in fixed mortgage rates. CREA’s senior economist, Shaun Cathcart, informed CBC News that due to the Middle East situation and the oil shock, the forecast had to be revised downward.
In March, the non-seasonally adjusted national average home price stood at $673,084, declining by 0.8% compared to the same period last year. The MLS Home Price Index decreased by 0.4% on a month-to-month basis, marking the 16th consecutive month of declines. While prices dropped in B.C., Alberta, and Ontario year-over-year, they trended upwards in other provinces.
Cathcart mentioned that the timing of the increased mortgage rates, coupled with the belief that they might be temporary, could deter buyers during the typically bustling spring season. Although the bottom for home prices is anticipated shortly, the recent shift in interest rates may prolong the wait-and-see approach among potential buyers.
Buyers are currently navigating uncertainties surrounding global events like the U.S. and Israel’s conflict with Iran and its potential impact on worldwide economies. CREA highlighted that the ongoing ‘global disasters’ are influencing market dynamics significantly.
Despite the current adjustments, CREA projects a 1.5% annual rise in the national average home price to $688,955 in 2026, with varied growth expectations across provinces. Additionally, a one-percent increase in sales is anticipated for the year, primarily driven by B.C. and Ontario, while other provinces are expected to observe modest gains or declines in sales.
Looking ahead to 2027, CREA foresees a 0.9% increase in average home prices to $695,094, with national home sales projected to climb by 2.1%. CREA mentioned the possibility of revising its forecasts upwards if the current oil shock proves short-lived.