Canadian home sales fell in September, extending a decline that began in August as higher mortgage rates and expectations of a Bank of Canada rate hike dampened market activity. According to the Canadian Real Estate Association, national sales dropped 2.3 percent month-over-month.

Why did Canadian home sales fall?

Several economic factors contributed to the cooling market during the month. The Canadian Real Estate Association noted that a jump in fixed mortgage rates and the expectation of a central bank rate hike before year-end discouraged buyers.

Additional pressures included:

  • An intensifying trade war between Canada and the United States.
  • A softening labour market.
  • Rising bond yields pushing up borrowing costs.

How have prices and listings changed?

Market activity slowed significantly, leading to a shift in the balance between buyers and sellers. The sales-to-new-listings ratio fell to 41.6 percent, which the association considers a buyer's market.

Home prices also experienced a downward trend. The composite benchmark price dropped 0.9 percent to $651,400 in September. This represents a 3.4 percent decrease compared to the previous year, bringing prices back to levels seen in early 2021. Meanwhile, the number of newly listed properties decreased by 1.8 percent from August.

What is the broader economic context?

The slowdown comes after a period of modest progress in the housing sector. The Canadian Real Estate Association has downgraded its sales forecast for 2026 for the third consecutive quarter. The group now expects a total of 444,530 homes to be sold by the end of the year, which would be a 5.2 percent decrease from 2025 levels.

This downward revision follows a "roller-coaster year" marked by global energy crises and inflation risks. While the market faced recent headwinds, some analysts note that the scale of current rate hikes may differ from the intense tightening cycles seen in previous years, though affordability remains a significant hurdle for many prospective buyers.

FAQ

Is the current market a buyer's or seller's market?

According to the Canadian Real Estate Association's guidance, the current sales-to-new-listings ratio indicates a buyer's market.

How much did home prices drop annually?

The Home Price Index fell 3.4 percent on an annual basis.