Canada’s housing market demonstrated a notable deceleration in September, with home sales declining 2.3 per cent month over month, as escalating mortgage rates began to weigh more heavily on prospective buyers. This downturn follows a period of modest growth, according to figures released Friday by the Canadian Real Estate Association (CREA).
The seasonally adjusted decline in September transactions from August was accompanied by a more substantial 7.7 per cent drop compared with September 2025. Shaun Cathcart, CREA senior economist, commented on the shift, stating, “After a four-month run of modestly positive progress on demand, supply and prices, many of Canada’s housing markets took a step back in September.”
Market Performance and Price Trends
The national benchmark home price registered at $652,800 in September. This figure represents a 0.4 per cent decrease from August and a 3.5 per cent decline from the previous year. The cooling effect of higher borrowing costs was a primary factor in this reversal.
New listings also saw a modest decline, falling 1.8 per cent month over month. Despite this, the sales-to-new-listings ratio edged down only slightly to 48.8 per cent from 49.1 per cent in August. CREA considers this ratio to remain within a range that indicates a balanced market between buyers and sellers, suggesting that while demand has softened, supply is also adjusting.
Impact of Rising Mortgage Rates and Future Outlook
Cathcart attributed the September slowdown directly to the current interest rate environment. “This was hardly surprising given the latest jump in fixed mortgage rates, and with the Bank of Canada now widely expected to follow with a rate hike before the end of the year,” he noted. The anticipation of further monetary tightening by the central bank appears to be a significant deterrent for potential homebuyers.
Looking ahead, CREA has revised its sales forecast downwards. The association now projects 444,530 transactions for 2026, which would mark a 5.2 per cent decline from the previous year. A subsequent rebound of 4.4 per cent is anticipated for 2027, suggesting a period of adjustment before recovery.
The ongoing challenge of housing affordability, combined with the uncertainty surrounding future interest rate decisions, is expected to keep some buyers on the sidelines. Cathcart articulated this concern, asking, “With housing affordability already stretched, the big question going forward is how much farther will the bank have to go to keep a lid on inflation next year?” He concluded that “Until that becomes clearer, this fresh round of uncertainty will likely send some buyers back to the sidelines,” underscoring the cautious sentiment pervading the market.
