Canadian Real Estate Prices To Remain Sluggish, Bear Markets Last Year

Canada’s housing market is expected to remain muted, with home prices likely to stay subdued in the coming months. BMO Capital Markets recently released a report warning that rising inventory and weak sales suggest little recovery in pricing pressures. Despite a small uptick in sales, the ratio of sales to new listings—the key gauge of pricing pressure—remains flat, signaling a slow market ahead.

In May, home sales climbed 3.5 percent on a seasonally adjusted basis. Yet new listings rose nearly the same amount, meaning the sales-to-new listings ratio barely budged. This ratio is critical: when it falls below 40 percent, it signals a buyer’s market—where supply overwhelms demand and puts downward pressure on prices.

BMO Chief Economist Douglas Porter emphasizes that while some see signs of a turnaround, the data still points south. He notes that even though some metrics hint at improving conditions, the sales-to-new listings ratio remains near soft levels. As Porter puts it, corrections in housing are measured in years, not months.

Prices have already dropped significantly. As of May, benchmark home prices in Canada were 17.5 percent below their February 2022 peak, with a 3 percent decline from the prior year alone. The benchmark price in May was about CAD 690,900, the lowest since May 2021—four years earlier.

BMO also highlights that real estate corrections historically span from two to fifteen years, depending on the prior bubble’s strength. Markets like Ontario, which mirrored the 1980s bubble, faced corrections lasting six years. With the current affordability challenges, a short-term rebound would defy historical trends and expectations.

Taken altogether, the outlook remains cautious. Weak demand, rising available homes, and stubborn affordability problems suggest home prices will stay under pressure. Unless there’s a significant shift in demand or inventory, the housing market in Canada is most likely to drift sideways or decline slowly for the foreseeable future.