Canada’s housing market hit turbulence in September with resales falling for the first time in five months after a period of gradual improvement.
Home sales declined 1.7% from August—marking the first monthly decline since April.
Mixed regional results highlight the fragile and uneven nature of the recovery underway.
Transactions fell in several major centres including Vancouver, Calgary, Edmonton, Kitchener-Waterloo, London, Ottawa, Gatineau, Montreal, St. John and Halifax. Still, activity increased in Victoria, Regina, Saskatoon, Winnipeg, Toronto, Quebec City and Sherbrooke.
Softening momentum
The decline in September follows a string of gains that began in spring. External factors, including renewed economic uncertainty, may have contributed to the slight pullback. A new round of targeted U.S. tariffs could have undermined confidence in the market again after months of de-escalation soothing some of the worst economic fears over the summer.
Contributing to weaker activity was a 0.8% drop in new listings in September from August, which may have constrained buyer choice.
The inventory of homes for sale appears to be stabilizing in Canada. Active listings have not increased in Ontario and British Columbia in the past three months—though they remain well above pre-pandemic levels. If sustained, this stabilization will temper competition between sellers, and eventually, steady home values.
Structural differences across regions
Home prices continued to fall in parts of the country where inventory is more abundant, and affordability is stretched like Lower Mainland B.C. and Ontario.
These markets continue to grapple with pandemic-era price gains and elevated borrowing costs—pushing ownership beyond the reach of many potential buyers.
However, prices remained on an upward trajectory in other regions including much of the Prairies, Quebec and Atlantic Canada. Supply-demand conditions are generally balanced or even tight in these markets, suggesting upward price pressure is likely to persist near term.
The contrast between regions reflects deeper structural differences in housing supply, population growth patterns, and economic conditions. Markets with more abundant inventory continue to favour buyers, while those with constrained supply remain seller-friendly.
Subdued recovery ahead
We expect resales to continue to recover gradually in the year ahead as lower interest rates, and in some markets, lower prices, stimulate buyer demand.
The Bank of Canada’s policy easing cycle should support affordability-constrained buyers, particularly first-time purchasers sidelined by elevated borrowing costs.
However, the process is unlikely to be smooth with persisting economic uncertainty, labour market softness and affordability issues poised to create waves. September’s setback serves as a reminder that the housing market recovery remains vulnerable to external shocks and shifts in sentiment.
For now, supply-demand continue to favour buyers in Vancouver and Toronto, pointing to further price declines near term. The abundance of choice provides buyers with negotiating power, and reduces urgency to act quickly on purchasing decisions.
Conditions are generally balanced or even tight in other markets, suggesting upward price pressure is likely to persist. These regions may continue to see modest price gains as limited inventory supports pricing power for sellers.
The path forward for Canada’s housing market will likely be characterized by continued regional divergence and periodic volatility as economic conditions evolve and policy measures take effect.
Robert Hogue is the Assistant Chief Economist responsible for providing analysis and forecasts on the Canadian housing market and provincial economies.