Canada’s housing market took a visible step backward in September after months of tentative progress. Resales fell 2.3% from August on a seasonally adjusted basis, interrupting the improvement that emerged earlier this spring.

What is driving the housing market retreat?

Two primary forces converged to keep buyers hesitant during the month. An intensifying Canada-U.S. trade war rattled consumer confidence, while anticipation of Bank of Canada interest rate increases pushed fixed mortgage rates higher.

According to the Canadian Real Estate Association (CREA), several factors contributed to the slowdown:

  • A 7.7% drop in transactions compared to September 2025.
  • A decline in the national benchmark home price to $652,800.
  • Softening labour markets adding to buyer hesitation.
  • Rising oil prices impacting bond yields and mortgage costs.

Regional impacts and price trends

The pullback in buyer activity accelerated price declines for the first time in seven months. The MLS Home Price Index fell 0.4% from August and sits 3.5% below last year's levels.

Regional performance varied significantly across the country. In the Greater Toronto Area, resales fell 5.3% month-over-month, while Greater Vancouver saw a 6.2% decline. Victoria experienced the most severe drop, with resales collapsing 25% in a single month. In contrast, Montreal showed resilience with a 2.9% gain in aggregate prices.

Future outlook for home sales

Due to the recent decline, CREA has revised its 2026 home sales forecast downward for the third time this year. The association now projects 444,530 transactions for 2026, representing a 5.2% decline from the previous year.

While the current environment is difficult, experts note the scale of the upcoming rate cycle may differ from the past. RBC Economics suggests the Bank of Canada may hike the overnight rate by a total of one percentage point in 2027, a more gradual pace than the rapid tightening seen in previous years.

FAQ

Why are mortgage rates rising if the Bank of Canada hasn't moved?

Fixed-rate mortgages have climbed because bond yields are rising in anticipation of future central bank rate hikes.

How did trade tensions affect the market?

Renewed Canada-U.S. trade tensions have dented consumer confidence, making prospective buyers more cautious about entering the market.