Canada’s housing market closed out 2025 on a softer note.
December data from the Canadian Real Estate Association (CREA) showed home sales down 2.7% month-over-month, with prices continuing to drift lower despite multiple Bank of Canada rate cuts throughout the year. Annual sales finished 1.9% below 2024 levels, underscoring how economic uncertainty — not borrowing costs alone — dominated buyer sentiment.
At first glance, this may feel disappointing. But context matters.
This Wasn’t a Structural Breakdown
According to CREA’s Senior Economist Shaun Cathcart, December’s slowdown wasn’t driven by a single national trend, but by coincident slowdowns across several major markets including Vancouver, Calgary, Edmonton, and Montreal. That distinction is important.
In other words, the market didn’t “roll over” — it paused.
Sales activity through much of spring, summer, and early fall 2025 showed an upward trend. December appears more consistent with year-end caution and fatigue, rather than a fundamental shift in housing demand.
Inventory Remains Balanced
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National inventory sits at 4.5 months, close to the long-term average of 5 months
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The sales-to-new-listings ratio remains near 52%, firmly within balanced market territory
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New listings fell for a fourth consecutive month, suggesting sellers are pulling back
This matters because it limits downside risk. Markets don’t typically see sharp price corrections without a meaningful oversupply — and that simply isn’t present today.
Prices: Selective Softness, Not a Collapse
Home prices dipped modestly again in December, with most of the softness concentrated in Ontario’s Greater Golden Horseshoe, particularly condos and townhomes. Detached homes have held up materially better.
Some markets have now given back a portion of the extreme gains from the 2020–2022 ultra-low-rate era — but that reset is increasingly being absorbed.
What’s Actually Driving Buyer Hesitation
The biggest headwind in 2025 wasn’t interest rates — it was uncertainty.
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Trade tensions with the U.S.
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Sector-specific tariffs impacting manufacturing regions
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Higher unemployment in certain industries
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A looming wave of mortgage renewals and refinances
Even as rates fell, confidence didn’t immediately follow.
Looking Ahead to 2026
There are several forces quietly building beneath the surface:
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Four years of pent-up demand, particularly among first-time buyers
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Rates that are now “about as good as they’re likely to get”
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Sellers pulling listings rather than chasing lower prices
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A record volume of renewals and refinances forcing households to reassess capital structures
As CREA Chair Valérie Paquin noted, absent another major shock, the spring 2026 market is likely to be materially more active.
My Take
Housing didn’t fail in 2025 — it paused.
For buyers, investors, and builders, the opportunity in 2026 won’t come from trying to “time the bottom,” but from:
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Understanding capital structures
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Stress-testing affordability and cash flow
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Being prepared before confidence returns
Markets tend to move before sentiment improves — not after.
Source: Commentary and data from Dr. Sherry Cooper and the Canadian Real Estate Association (CREA)