As the global economy adjusts to another wave of geopolitical friction, Canada’s housing market is starting to feel the pressure. A recent forecast now expects national home prices to decline by 2% in 2025, with little to no growth projected for 2026. This marks a clear shift from earlier predictions of modest gains.

At the heart of this market adjustment is a decline in buyer confidence. The ongoing trade war, led by heightened tariffs between the U.S. and Canada, has impacted not only business sentiment but also consumer behavior. Many prospective homebuyers are holding off, driven by concerns about job security and financial stability.

While demand has cooled in several markets, supply is slowly building. This has contributed to a roughly 3% decline in average home prices so far this year. Despite these challenges, we’ve also seen positive momentum: the Bank of Canada’s substantial interest rate cuts have helped maintain affordability, especially for first-time buyers re-entering the market.

In major cities like Toronto and Vancouver, further price corrections are expected this year. Toronto may see up to a 4% dip in average home values, while Vancouver could experience a 2% decrease. These shifts could create opportunities for well-prepared buyers to enter the market with stronger negotiating power.

Looking ahead, expectations for a market rebound are tempered. Forecasts now call for a flat market in 2026, signaling a period of stabilization rather than immediate recovery. However, if inflation stays in check and borrowing costs continue to ease, we may see the beginning of a turnaround by late next year.

Affordability, while improving gradually, remains a central issue. Most experts agree that the market is still out of reach for many Canadians, with average prices continuing to outpace income growth. Incremental improvements are welcome, but broader solutions—including more affordable housing options and development incentives—will be needed to make a lasting impact.

For buyers and sellers alike, it’s more important than ever to stay informed. Understanding where the market stands—and where it’s likely headed—can help you make smarter, more confident decisions.