CREA Slashes 2026 Housing Forecast as Oil Shock and Tariff Uncertainty Rattle Buyers

The Canadian Real Estate Association has sharply downgraded its national housing forecast for the year, citing a mid-March spike in fixed mortgage rates tied to higher inflation expectations from oil prices, ongoing uncertainty around United States tariffs, and a weaker than expected start to the year for the broader Canadian economy. In its updated outlook, CREA projects approximately 474,972 residential properties will trade hands across Canadian Multiple Listing Service systems in 2026, an increase of just one per cent over 2025 and several thousand sales below the association's previous forecast.

What the new forecast says

The national average home price is now expected to rise just 1.5 per cent to $688,955 in 2026, with virtually no growth projected in British Columbia, Alberta, or Ontario, the three provinces that account for the bulk of national activity. Gains in the rest of the country are expected to fall in the two to five per cent range, well below the inflation rate the Bank of Canada now projects for the year.

For 2027, CREA expects national average prices to edge up 0.9 per cent to $695,094, with gains held below the inflation rate across all provinces. The association said the projection assumes a gradual easing of mortgage rates beginning in late 2026 and a partial resolution of trade uncertainty by mid-2027. Should either of those assumptions prove optimistic, CREA warned, the forecast would be revised lower again.

National sales volumes were essentially flat from February to March, falling 0.1 per cent on a seasonally adjusted basis. The number of newly listed properties was up modestly. National inventory finished March at five months, in line with the long-term average and a balanced level for the market overall, although the headline figure masks significant divergence between regions.

What changed since January

CREA's January forecast had projected a stronger spring, with sales expected to climb meaningfully as buyers returned to the market after the Bank of Canada's late-2025 rate cuts. That forecast assumed mortgage rates would continue trending lower through the first half of the year, that the broader economic outlook would stabilise, and that buyer confidence would recover from the trough of late 2025.

The factor the association did not anticipate was a return of inflation pressure driven by global oil prices. The conflict between Israel and Iran, ongoing instability around the Strait of Hormuz, and tighter OPEC supply discipline pushed Brent crude above ninety United States dollars a barrel through the second quarter, with knock-on effects on Canadian gasoline, transportation, and home heating prices. The Bank of Canada's April Monetary Policy Report now forecasts inflation rising to roughly three per cent in the spring, and bond markets have repriced accordingly.

Five-year fixed mortgage rates, which respond to bond yields rather than the overnight rate, climbed by roughly forty basis points in the second half of March before stabilising in early April. Variable rates, tied to the prime rate, were unchanged. The mid-March move in fixed rates coincided with a noticeable softening in buyer activity in southwestern Ontario, the Greater Toronto Area, and the Lower Mainland.

Regional divergence

The headline forecast disguises a sharp split between regions. Atlantic Canada, the Prairies excluding Calgary, and parts of Quebec have continued to see solid sales growth and price appreciation, supported by strong population growth, relatively affordable entry prices, and resource-sector employment that has been less exposed to United States tariff measures.

British Columbia, Alberta, and Ontario have all seen activity weaken. In British Columbia, the Lower Mainland has seen condominium sales weaken sharply, with several active developments scaling back launch volumes and offering buyer incentives that had not been seen since the depths of the 2023 correction. In Alberta, Calgary's strong run through 2024 and 2025 has slowed, with affordability still meaningfully better than other major cities but with momentum having clearly moderated. In Ontario, the Greater Toronto Area has seen weaker sales across all price brackets, with detached home volumes particularly soft.

Quebec, by contrast, has held up. Montreal Island and surrounding areas continue to see solid demand from interprovincial migration and from buyers re-entering the market after several years on the sidelines. CREA expects Quebec to outperform the national average for both sales volumes and price growth in 2026 and 2027.

What it means for buyers and sellers

For prospective buyers, the new forecast suggests that affordability conditions are unlikely to change dramatically in the coming year. Prices will remain near current levels in most major markets, mortgage rates may move sideways or higher rather than lower in the near term, and inventory will be sufficient to give buyers some negotiating leverage in most cities. CREA's deputy chief economist said the environment supports a return to traditional negotiating dynamics where buyers can take their time and conduct full due diligence on properties of interest.

For sellers, the message is more complicated. Sellers in Ontario and British Columbia who have been waiting for the market to recover before listing may be facing a longer wait than expected. Sellers in markets where activity has held up, including parts of Atlantic Canada, the Prairies, and Quebec, are continuing to find buyers but at price points that are not significantly above where they were a year ago.

For renters, the outlook is mixed. The same forces depressing condominium sales in the Lower Mainland and the Greater Toronto Area are also slowing the delivery of new rental supply, particularly in the purpose-built rental segment that depends on developer financing tied to projected condominium sales prices. Vacancy rates are likely to stay tight in most major cities through 2026 and 2027.

The mortgage market

Posted five-year fixed mortgage rates at major Canadian lenders are now in the 4.5 to 4.9 per cent range, depending on the lender and the borrower's qualifications, up from a low of approximately 4.2 per cent in early March. Variable rates linked to prime sit near 5.0 to 5.5 per cent depending on the discount. Mortgage broker channels reported a noticeable uptick in clients converting from variable to fixed in mid-March, anticipating that prime would not move down materially before fixed rates moved up.

Renewal volumes will be heavy through 2026 and into 2027, with a large pool of mortgages originated in 2020 and 2021 at historically low fixed rates now coming due at meaningfully higher renewal rates. The Bank of Canada has flagged the renewal cycle as a source of ongoing pressure on household consumption, although the effect has been less severe than initially feared because of strong wage growth and a longer-than-expected period of falling rates through 2024 and 2025.

The view from policymakers

Federal Housing Minister, asked about the CREA forecast on Wednesday, said the federal government remains focused on the supply side of the equation through the Canada Strong Fund, the federal lands programme, and the housing investments included in the spring economic update. The minister said the government's expectation is that supply-side measures will produce more durable affordability gains over time than demand-side incentives.

Provincial housing ministers in Ontario, British Columbia, and Alberta have continued to emphasise zoning and approvals reform as the most important lever for restoring affordability. Municipal officials in Toronto, Vancouver, and Calgary have largely echoed that emphasis. Industry groups, including the Canadian Home Builders' Association and the Building Industry and Land Development Association, have called for additional federal action on development charges and on the goods and services tax treatment of new construction.

What's next

The Bank of Canada's next scheduled rate decision is on June 10. Markets are currently pricing roughly even odds between a hold and a quarter-point cut, with the balance tilting toward a hold if oil prices fail to ease materially in the next four weeks. CREA's next forecast update is due in mid-July, after the spring selling season has concluded and after the Bank of Canada's June decision and updated Monetary Policy Report.

For Canadians watching the housing market closely, the message from the spring data is one of patience. The fast-moving recovery many had penciled in at the start of the year is now expected to play out more slowly, the gains in price will be modest, and the geographic divergence between markets will likely persist. For first-time buyers, the period of relative balance now in place across most major cities is the most favourable negotiating environment in several years. For sellers and developers, it will require a recalibration of expectations.