Canada's housing agency reverses its earlier outlook, now projecting lower sales and prices in 2026
The national housing market will shrink in 2026 rather than grow, Canada Mortgage and Housing Corporation (CMHC) warned in its 2026 Housing Market Outlook Mid-Year Update, marking a significant pullback from the agency's February forecast.
CMHC now projects 457,200 home sales nationally this year, down from 470,314 transactions recorded in 2025, with the average selling price falling to $675,200 from last year's $679,543.
As recently as February, the agency had projected both figures to rise.
The revised outlook reflects the cumulative weight of economic uncertainty, slower population growth, elevated borrowing costs, and modest income gains — forces that CMHC said are expected to keep would-be buyers cautious well into the second half of the year.
Geopolitical pressures compound the domestic picture. The ongoing US-Iran conflict is forecast to temporarily lift inflation, while continued Canada-US trade uncertainty is dampening business investment and hiring decisions across the country, according to the mid-year update.
"Price reductions have not yet been enough to bring demand back into the market as economic uncertainty, income growth and borrowing conditions all have played a role in sidelining buyers," said Kevin Hughes, deputy chief economist at CMHC.
"We expect conditions to improve over the medium-term, however, housing construction should remain suppressed as the industry factors in today's elevated inventories and weaker demand."
What's keeping buyers away
The signal from practitioners matches CMHC's revised assessment. According to the Ownright Operators Report, a survey of 1,015 real estate professionals conducted across Canada between March 27 and April 29, two in five brokers cited recession fear as the top deal killer.
Forty percent pointed to broader economic anxiety as the primary reason buyers were holding back. Interest rates ranked third at 15%.
The construction side is retreating alongside demand. CMHC projects housing starts to fall to 241,400 units in 2026, down from 259,028 in 2025, as builders respond to unsold inventories and high construction costs.
While housing starts jumped in April amid a temporarily firmer pipeline, CMHC cautioned that the broader construction trend remains subdued, with Ontario and British Columbia condominium markets facing historically low activity levels.
Fresh US tariffs on Canadian goods are raising new questions for the housing market, with renewed uncertainty clouding buyer confidence and the outlook for mortgage rates and the broader economy.https://t.co/cklHjg8ES1
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 21, 2026
A regional split that keeps widening
The country is not deteriorating evenly. Prairie markets are expected to sustain above-average sales volumes and lead price growth nationally through 2026, supported by relatively strong employment conditions and more accessible price points.
Quebec should post modest gains amid comparatively balanced conditions.
British Columbia and Ontario face the heaviest headwinds — slower population growth, persistent affordability constraints, and a surplus of condominium units are expected to suppress both resale activity and new construction well into the forecast period.
On the rental side, CMHC projects a gradual easing from the historic construction peak reached in 2025.
Rising vacancy rates in Toronto, Vancouver, and Montréal should slow rent growth in those cities, particularly for asking rents on newly listed units.
Across the country, however, rents remain high relative to incomes, and affordability pressures for renters are expected to persist.
CMHC's baseline sees the market returning to modest growth in 2027 and 2028 as broader economic conditions improve, though sales are expected to remain below the levels that characterised the decade before 2025.
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