Affordability has proven an enormous problem in Canada’s housing market in recent years, whether for first-time homebuyers attempting to purchase a property or plenty of homeowners struggling with a jump in monthly mortgage payments.
With 2026 already underway – and a deep correction at play across many cities’ housing markets, particularly in the condo sector – has that picture improved yet this year?
In January, affordability improved in 12 of 13 major Canadian housing markets, according to Ratehub, although the highest drop in average monthly mortgage payments was still just $100, in Vancouver.
And falling house prices have been a double-edged sword: while lower valuations can present challenges for existing homeowners upon mortgage renewal time, they’ve also opened doors for some first-time buyers who were previously frozen out of the market.
Lenders’ Choice Mortgages broker owner Mike Kazarian told Canadian Mortgage Professional he was starting to see more first-time buyers seeking preapprovals to enter the market in the Greater Toronto Area (GTA).
Those individuals, he said, are taking a flexible approach to their search. “Some people are looking for condos, but people seem to want something a little bigger and they’re willing to go outside of Toronto – whether it be Milton, Burlington, or just outside the GTA,” he said. “It all depends on their expectation.
“If their expectation is that they’re going to qualify for an $800,000 purchase and they only really qualify for a $650,000 purchase, then that’s where the numbers lie. So it’s about creating realistic expectations.”
Homeowners confront headwinds as property values slide
Waning home prices may be good news for hopeful buyers, but they can prove problematic when homeowners renew their mortgage – especially at significantly higher rates than they likely secured five years ago.
That shock means mortgage holders are turning to options including refinancing and extended amortizations to meet their cashflow needs – but in some cases their hands are tied because their property value has declined.
“Their property value may not support the loan-to-value requirements of the lender,” Kazarian said. “For example: you purchased a home for $1 million five years ago and you have an $800,000 mortgage, so 80% loan-to-value. It’s a conventional mortgage.
“But now this property appraises at $900,000 so you can’t switch lenders. You’re held to the lender that you currently have and they may not have competitive rates. I’m also seeing a lot of people who had two family incomes and now they’re down to one income, so they’re not going to qualify for a mortgage either.”
Those challenges are pushing some homeowners back into the rental market because the burden of handling a mortgage is simply too much stress, Kazarian said.
Geopolitical strife continues to weigh down market
Global trade tensions and economic uncertainty poured cold water over hopes of a Canadian housing market rebound in 2025 after a quiet couple of years, and plenty of that unease has stretched into this year.
Kazarian doesn’t see a protracted meltdown in the housing and mortgage sectors, although it’s unclear when the light at the end of the tunnel will arrive for struggling homeowners.
“The reality of it is that real estate always ends up going up. Right now is just a blip,” he said. “We know that inventories are going to be low because there’s not much construction going on.
“So people need to be able to hold on. But is that two, three, four years out? We don’t know.”
And the fact that more first-time buyers are able to afford a property as prices fall means pent-up demand will probably keep a floor under the market, he added.
“I think the resale market should increase. There’s a lot of buyers sitting on the sidelines right now,” Kazarian said. “I’ve had a lot of first-time homebuyers reach out to me, so I think the market is going to pick up.
“As to where prices are going to go – have we hit a bottom yet? Nobody knows. But I think resale prices are going to pick up in the second half of 2026.”
CMP
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