Four months of housing stability may be over as rate hike fears resurface for Canadian borrowers
Canadian home sales fell in August for the first time since spring, as rising inflation risks and the renewed prospect of a Bank of Canada rate hike threatened to cut short a tentative housing market recovery, the Canadian Real Estate Association (CREA) reported.
National sales through MLS systems declined 0.7% on a seasonally adjusted month-over-month basis last month, while actual unadjusted activity came in 6.9% below the same month last year.
Monthly activity had held largely steady since May, though the market had yet to fully repair the damage from its earlier slump.
National transactions remained roughly 12% below the decade-long average, according to RBC Economics, a gap that underscored how much ground still needed to be recovered despite four straight months of gains in Canada's housing market
"Sales activity and price trends were largely unchanged for a fourth consecutive month in August," said Shaun Cathcart, CREA's senior economist.
"What has changed is the broader economic environment, with the Bank of Canada recently warning of rising inflation risks, along with doubts about the durability of recent economic growth."
Canada's Consumer Price Index (CPI) held at 3% year over year in August for a second consecutive month, Statistics Canada reported Monday. That's a steady headline that may already be outdated by the time the BoC meets for its October 28 rate decision.
Avery Shenfeld of CIBC Capital Markets says the Bank of Canada faces a very different set of economic conditions than the U.S., arguing that policymakers can afford to remain patient despite growing expectations of Federal Reserve rate hikes.https://t.co/0ufm9YV95E?
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 15, 2026
New listings climb as sellers eye the fall
Supply conditions shifted in August. New listings across Canadian MLS systems rose 3.3% month over month, reversing three consecutive monthly declines and reflecting what CREA chair Garry Bhaura described as sellers moving early to capture the fall market.
"For buyers, it will mean the usual seasonal burst of new properties to choose from, but at the same time they also have to contend with a fresh round of economic uncertainty," Bhaura said.
The sales-to-new listings ratio eased to 49.1% in August from 51.1% in July, remaining within CREA's balanced-market range of 45% to 65%.
National inventory stood at just under 200,000 properties at month's end, in line with the historical average for August and just 1.4% above August 2025 levels.
Months of inventory held at 4.8 for the fourth consecutive month, slightly below the long-term average of five months.
Rate risk sharpens as headwinds build for borrowers
On price, the National Composite MLS Home Price Index (HPI) was unchanged from July to August, extending a run of flat monthly readings that has persisted since spring — the longest such stretch of price stability since 2024.
Year over year, however, the HPI remained 3% below August 2025 levels. The national average sale price reached $668,219 in August, up 0.6% from the same month a year earlier.
Cathcart said the economic environment heading into 2027 has shifted materially for borrowers.
Fixed mortgage rates have already moved higher on rising bond yields, while markets have begun pricing in a variable rate increase before year's end.
"This fresh round of incoming headwinds is expected to dampen the prospects for further housing market momentum heading into 2027," he said.
Those concerns echo questions raised by economists about whether the Bank of Canada could hike rates before the end of 2026. BMO Capital Markets chief economist Doug Porter said in July that rising inflation had "rekindled chatter of a potential rate hike in 2026," a dynamic that now appears more immediate than it did only weeks ago.
CREA had already revised its 2026 sales forecast lower in July. They are now projecting 463,336 properties to change hands through Multiple Listing Service (MLS) Systems. That's a 1.4% decline from 2025 that reverses the modest gain the association had anticipated as recently as April.
The national average home price is forecast to rise 1.1% this year to $686,710, roughly $2,000 below CREA's spring projection. Ontario is the only province still expected to record annual sales growth.
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