Canada: Housing Markets Tread Water as Sales Remained Soft in March

In the resale market, March’s seasonally adjusted home sales were little changed from February, on par with our expectations and slightly below seasonal norms. Fixed mortgage rates began to drift higher in mid-March amid rising inflation expectations tied to geopolitical disruption External link., potentially keeping some buyers on the sidelines. Overall, home sales in the first quarter of 2026 were weak, running 8% below a year earlier.

Nationally, new listings declined 0.2% m/m and inventory remained steady at 5.0 months in March. The sales-to-new-listings ratio held at 47.8%, firmly within balanced market territory. Toronto and Vancouver remained buyer’s markets, while the Province of Quebec and other major centres stayed balanced (graph 1).

With demand soft and supply near long-term norms, there was little upward pressure on selling prices last month, though regional differences were notable. First quarter sales were weaker than a year earlier in every province and major centre, but particularly in Western Canada. Prices haven’t followed to the same extent, as most regions still posted modest year-over-year quarterly gains in average selling prices. This may reflect sellers’ reduced willingness to lower prices further, opting instead to wait for suitable buyers.

Mortgage arrears have continued to edge up from pandemic-era lows and now sit at about the 2015–19 average, but with a growing share concentrated in Ontario. As homeowners continue to face a challenging mortgage renewal wall tied to expiring 5‑year terms, it’s worth noting that average selling prices in all major municipalities remain above their levels from five years ago, providing some equity cushion. Those renewing mortgages that originated on 3‑year term are likely to benefit from lower fixed rates in 2026. That said, the risk is not uniform. For instance, average home prices in Toronto are currently about 7% below where they stood three years ago, potentially limiting equity gains for some recent buyers (graph 2).

Nationwide, housing market conditions have softened as weaker sales have weighed on prices, though the picture varies widely by province. Looking ahead, economic conditions External link. point to a firmer pace of sales activity External link. as the year progresses, but with inventory levels higher in Canada’s largest provinces than a year ago, price growth is likely to stay restrained.

Given upside risks to inflation from elevated oil prices and downside risks stemming from the Canada-United States-Mexico Agreement (CUSMA) joint review, we expect the Bank of Canada to remain cautious and hold policy rates unchanged at its next announcement. But our analysis External link. showed that if a sustained rise in oil prices reignites inflation and hastens rate hikes, homebuying affordability will likely worsen as higher rates could more than offset any savings from lower prices in a softer housing market.