Canada’s Housing Market Faces Prolonged Cooling as CMHC Cuts Outlook

Existing-home prices have failed to dip low enough to lure new buyers into the market, as modest income growth and elevated mortgage rates continue to suppress demand. Kevin Hughes, the agency's deputy chief economist, noted that while conditions may improve in the medium term, construction activity will likely remain subdued as the industry navigates a surplus of existing inventories.

The agency currently projects 457,000 home sales for 2026, a 7% decrease from previous estimates. This downward pressure extends to pricing, with the average home value now forecast at 675,200 Canadian dollars—a 3.3% reduction from prior projections. Housing starts are also facing headwinds, with annualized figures now expected to reach 241,400, down from an initial target of 247,000. These figures arrive on the heels of a similar revision from the Canadian Real Estate Association, which reported a 3.4% year-over-year decline in existing-home prices as of June. Since the Bank of Canada began its aggressive interest-rate hiking cycle in early 2022 to combat inflation, national housing prices have retreated more than 20% from their peak.