Higher bond yields push TD to rewrite its resale outlook, and the recovery now rests on a big if
TD Economics has cut its outlook for Canadian home sales. It warns that climbing bond yields, which set the price of fixed mortgage rates, will keep the resale market subdued through 2027, even with the Bank of Canada (BoC) on the sidelines.
The Provincial Resale Market Outlook projects national home sales will fall 5.3% this year. That is far steeper than the 1.8% decline TD projected earlier in 2026.
Average home prices are expected to finish the year roughly flat, up 0.1%, before rising 1.7% in 2027.
Economist Rishi Sondhi, the report's author, linked the downgrade to a global selloff in government bonds. National sales slipped in August for the first time in six months. TD now expects yields to stay higher through next year than it forecast in June. It expects this even though its baseline assumes the BoC holds its 2.25% policy rate until the end of 2027.
The pressure has been building for weeks. The five-year Government of Canada yield had climbed about 90 basis points year over year by mid-September.
Why the housing recovery now depends on bond yields
TD's forecast comes with a major condition. The modest quarterly gains it expects in sales and prices next year depend on yields starting to ease in the fourth quarter of 2026 and falling further through 2027.
Pent-up demand and a slowly improving job market should also help. However, TD trimmed its labour outlook after the latest escalation in the Canada-US trade dispute.
Derek Burleton, vice-president and deputy chief economist at TD Bank Group, was more cautious about timing during his MortgageFest Canada keynote on the Bank of Canada outlook in Mississauga, Ont., on September 23.
"Now, I'm comfortable with the 5-year yield. I do think that there's room for it to begin to pull back, probably not till next year," Burleton said.
He added that yields would not return to March 2025 levels. "They're going to remain more elevated for longer," he said.
Even under TD's baseline, sales are expected to stay well below pre-pandemic levels next year.
At #MortgageFest Canada, Aled ab Iorwerth of CMHC and Taylor Little of Neighbourhood Holdings discussed housing supply, density and affordability, highlighting the need for more family-friendly housing options.https://t.co/QGc0eiJT9M
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 25, 2026
Where brokers can expect the strongest home sales rebound
The provincial outlook is uneven. Ontario's sales are forecast to fall 3.0% this year and then rebound 7.4% in 2027, the strongest gain of any province. British Columbia sales are expected to drop 5.6% before recovering 5.4%.
Prices in both provinces are expected to lag. After declines of 2.6% in Ontario and 1.3% in B.C. this year, TD sees gains of just 0.6% and 0.9% in 2027, held back by weak population growth.
Prince Edward Island faces the deepest sales drop this year, at 11.0%, and Alberta follows at 9.3%. Saskatchewan leads on prices, at 4.5% this year and 3.8% next year.
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