CREA cuts its 2026 housing outlook.
Forecast trimmed after late-March shock
The Canadian Real Estate Association (CREA) said it has lowered its housing-market forecast for 2026 after a late-March surge in oil prices pushed up inflation expectations and fixed mortgage rates. Shaun Cathcart, senior economist at CREA, told CBC News that the association had expected pent-up demand — notably from first-time buyers — to lift sales this year. "We've had to change that and lower it because of the situation in the Middle East and the oil shock," Cathcart said.
CREA is adjusting its forecast because the market outlook has changed, not because activity suddenly dropped. The association noted the timing of the rate-sensitive shock — as buyers typically return to the market in spring — reduces the chance that those buyers will leap in at current rates. Cathcart said the likely bottom for home prices is "right around the corner," but that higher borrowing costs have encouraged some would-be buyers to wait.
How oil pushed rates and mortgage costs up
A spike in oil prices in the second half of March raised the expected path for inflation. Higher expected inflation pushed bond yields higher. And when government bond yields climb, the price of fixed-rate mortgages tends to follow. This chain of events caused fixed mortgage rates to rise across the market.
RBC senior economist Claire Fan said the Bank of Canada's decision to hold its policy rate recent was "perhaps the least interesting part" of the central bank's announcement, in her view, because the central bank framed the outlook as uncertain and tied to swings in energy revenues. "The Bank can't say the impact of high oil prices," Fan said, noting the central bank faces a trade-off between the growth boost from stronger energy revenues and the inflationary pressure those revenues can create.
Sales and prices: mixed signals
CREA reported that the number of home sales recorded through Canadian MLS Systems was virtually unchanged in March, slipping 0.1 per cent from February on a seasonally adjusted basis.
Measured against March 2025, actual activity was 2.3 per cent lower.
The association's national measures show uneven pressure across provinces. CREA said the non-seasonally adjusted national average home price was $673,084 in March, down 0.8 per cent from the same month a year earlier. The MLS Home Price Index, a measure that strips out composition effects, fell 0.4 per cent month over month — marking the 16th straight month of declines in that index.
Prices were down year over year in British Columbia, Alberta and Ontario, while gains in other provinces partially offset those declines. CREA also reported that 167,524 properties were listed for sale across Canadian MLS systems in March, a figure that helps explain why national averages haven't plunged: inventory remains elevated in some markets even as activity cools.
Why buyers might stay sidelined
Cathcart said buyers are weighing not only mortgage rates but also geopolitical risk. He pointed to the conflict between the U.S. And Israel and Iran as an example of unpredictable global events that can reverberate through commodity markets and central-bank expectations. "It's not a matter of getting a forecast wrong. It's a matter of these massive global disasters, really, that continue to unfold," he said.
That uncertainty matters for spring demand. Some households that had been waiting for a small drop in rates may now adopt a 'wait-and-see' stance. Others — particularly first-time buyers who are constrained by affordability — can be pushed out entirely if fixed-rate offers move materially higher. CREA's downgrade therefore reflects both the direct impact of higher mortgage costs and the behavioural response from buyers who opt to linger on the sidelines.
Where this leaves policy and markets
The Bank of Canada has signalled sensitivity to incoming data, and the oil-driven uptick in inflation expectations complicates decisions for policymakers. Higher oil prices can boost nominal GDP and government revenues in energy provinces, while also adding upward pressure to consumer prices nationally. The net effect for monetary policy is ambiguous, and that ambiguity tends to keep markets on edge.
Economists note that although one commodity shock usually doesn't change long-term housing trends, it can shift when the market turns. If bond yields remain elevated because markets expect more inflation, fixed mortgage rates could stay higher for longer, which would slow some of the tentative recovery CREA had anticipated. If oil prices retreat and inflation expectations cool, the pressure on rates could ease.
Regional implications and market mechanics
The provinces showing year-over-year price falls — B.C., Alberta and Ontario — contain some of Canada's largest and most expensive markets. That means national averages are sensitive to price moves in those provinces. At the same time, smaller provinces showed rising prices in March, which muted the national decline.
Fixed mortgage rates rise because lenders expect higher yields on long-term government bonds. Lenders then price new fixed-rate mortgages to cover those costs and manage risk. Variable-rate mortgages, tied more closely to the prime rate and the Bank of Canada's policy rate, are less directly affected by bond-market moves, but the perception of higher rates across the board can dent buyer confidence.
Inventory also matters. Higher listings in some markets — captured in CREA's 167,524 listings figure — give buyers more choice and can blunt price spikes, even as sales slow. That dynamic helps explain why average prices can be down modestly while some local markets remain tight.
Outlook for buyers and sellers this spring
For sellers, the immediate risk is that higher mortgage rates reduce the pool of qualified buyers and extend time on market. For buyers, the challenge is balancing the cost of higher monthly payments against the expectation that prices may continue to drift down slowly.
Cathcart said buyers and sellers now face the same ingredient of uncertainty that affected markets last year, when tariff announcements and other shocks caused whipsawing expectations. "I think we just have to cross our fingers that maybe this is the last big one for a while," he said, acknowledging how geopolitical events have repeatedly affected forecasts over the past two years.
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CREA says the non-seasonally adjusted national average home price was $673,084 in March.
This article was created with AI assistance.
