Home prices are sliding across many parts of Canada, but that trend still wasn’t enough to stoke the national housing market into life at the beginning of this year.
Sales slipped by 5.8% last month compared with December, the Canadian Real Estate Association (CREA) said on Wednesday, as the MLS Home Price Index (HPI) posted a 4.9% year-over-year decline.
That marked a gloomy start to 2026 for sellers hoping to get top dollar for their listings, but better news for would-be homebuyers on the margins of the market.
Still, plenty of those potential buyers aren’t biting, sitting on the sidelines despite momentum finally swinging away from sellers in recent months.
CREA said overall homebuying activity was curtailed by punishing weather conditions, especially in Ontario.
With the Greater Golden Horseshoe and Southwestern Ontario leading the national slump, the story was “probably more about a historic winter storm than a downshift in demand,” according to the association’s senior economist Shaun Cathcart.
Anne-Elise Cugliari Allegritti, vice president, research and communications at real estate giant Royal LePage, told Canadian Mortgage Professional buyers and sellers may have had drastically different priorities at the beginning of the year, partly due to the unusually severe winter in parts of the country.
That makes it difficult, she said, to gauge whether the sluggish start to the year was a one-off or a sign of further cooldowns ahead.
“Where is a seller sitting in January?” she said. “For a seller that maybe took their home off the market before Christmas because they thought ‘I’ll take a break over the holidays,’ the New Year is a new opportunity to get back into it. They want to move on with their selling plans, probably so they can move on with their buying plans.
“And they’re sort of in this position: ‘I’m ready to go.’ A buyer, on the other hand, sees four, six, 10 inches of snow on the ground and might say, ‘I can wait until next month to start shopping again.’”
Other factors hindering the housing market
But while extreme weather likely had a part in the slower pace of January activity, other longer-lasting trends are also at play – including the fact that prices in many markets, despite their recent decline, are still far too high for the average first-time buyer.
And even those who can finally afford a home might be hesitant to take the plunge either because they think prices will fall further, or due to concern about the direction of the economy.
“Every buyer wants to know that they’ve paid the lowest possible price that they can, just as a seller hopes that they’re getting the most that they possibly can for their home,” Cugliari Allegritti said.
“But I think what’s holding people back right now, besides this relentless winter that we’re experiencing, is still a bit of unease, a lot of uncertainty about our economic future.”
No sign of a rush to the market as prices continue to cool
Another bleak month for Canadian home sales also looks likely to cement the notion that prices aren’t set to climb anytime soon, another factor that could convince buyers it’s better to wait in hope of lower prices down the line.
“I don’t think there’s a real urgency or fear that prices are going to go up,” Cugliari Allegritti said. “So for buyers that are looking around, if they’re not desperate to move or in a situation where they have to start a new job by X date and they have to be in a new home, whether they buy this month or two months from now isn’t going to make a massive difference.”
Buyers, especially those purchasing for the first time, have had a hard time keeping up with rampant price appreciation in Canada’s housing market over the past decade, especially during the COVID-19 pandemic when frantic bidding wars sent prices skyrocketing.
Now, even if the numbers show those buyers aren’t flooding the market, an improving affordability outlook for non-homeowners is a positive development, Cugliari Allegritti said.
“I think what’s positive that we can take away from this is that affordability and opportunity are continuing to improve,” she said. “And that’s certainly going to be welcome news for younger Canadians and for first-time buyers.”
CMP
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