As tariffs loom over Canada's economy, housing market started “slower than expected” in the spring but could recover in the fall, Royal LePage said in a new report released Wednesday.
The report says the housing market could find “balance” in the fall, meaning the decline in Canadian home prices could reach a stage by the end of the year.
“The Canadian housing market is moving toward balance as lower prices, rising supply and renewed rate cuts increase housing affordability in most regions,” Royal LePage CEO Phil Soper said in a statement.
“For the first time in many years, buyers – particularly in markets that were previously supply-constrained – have real choice and bargaining power. With confidence returning and further rate cuts expected in early 2026, we expect a strong pick-up in activity by the spring.”
Nationally, the average home price in Canada is expected to be $827,796 by the end of the year, a modest one per cent increase from $819,600 at the same time last year.
Some of the country's most expensive markets, such as Toronto and Vancouver, will see prices decline from late 2025 levels. In the Greater Toronto Area, the average home is expected to cost about $1.11 million, down three per cent from last year, Royal LePage said in a report.
Meanwhile, by the end of the year, the average home price in Greater Vancouver will be about $1.2 million, down two per cent from last year.
Quebec is expected to see the biggest increase in home prices, with a 15 per cent jump, but with the average home price in the city at $460,690, that's well below the national average, the report said.
While this is some recovery from the spring, building on modest price gains over the summer, experts warn that a full recovery is still not on the horizon.
“We have not yet reached that turning point where there is additional pressure on prices or competition. Many buyers are still holding out,” said Royal LePage spokeswoman Anne-Elise Cugliari Allegretti.
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Allegretti said the housing market's recent lows are a “correction” from the housing market's peak in 2022, when home prices rose to unaffordable levels for many.
“This was the first time in decades that we had such a large correction or such a long period of improvement in affordability, especially in the most expensive markets like Toronto and Vancouver,” she said.
What holds customers back?
The dream of owning a home remains out of reach for many Canadians. The latest housing affordability report released by Ratehub.ca shows housing affordability has worsened in seven of Canada's 13 largest cities.
The report shows that for a Toronto family to be able to afford a home in the current market, they would need to have a household income of $200,160. In 2023, the median household income in Toronto was $134,300, according to the Canada Mortgage and Housing Corporation.
In Vancouver, a family would need an income of $234,700 to afford a home, according to Ratehub. However, according to CMHC, the median household income in Vancouver is about $126,000.
With housing affordability still not at comfortable levels, “there's really no urgency to buy today,” Allegretti said.
“If something might be even more affordable next month or if I have a few more months to save a lot more off my down payment, they have a little more room to play,” she said.
Many Canadians are still watching for signs of easing from U.S. President Donald Trump's trade war or major policy announcements in Canada, said BMO economist Eric Johnson.
“I think a lot of people are still waiting to see if we can get a few more interest rate cuts as we expect the Bank of Canada to implement that before March of next year,” he said.
With the unemployment rate already at 7.1 per cent, Canadians are concerned about job losses from the trade war, Johnson said. This economic uncertainty prevents them from taking the plunge and making a large purchase, such as a car or a house.
“The big shadow that hangs over the entire Canadian economy and much of the North American economy is where all the USMCA negotiations will take place,” he said, referring to the Canada-U.S.-Mexico trade agreement, also known in Canada as CUSMA.
In April, Trump exempted goods covered by the agreement from his tariffs. While this has softened the impact of Canada's trade war, some industries, such as steel, aluminum and autos, still face high tariffs.
The impact of these tariffs is showing up in the housing market recovery, as home values fall in communities dependent on U.S. trade, Allegretti said.
“In southern Ontario, in the Greater Golden Horseshoe, we are seeing a greater decline in home prices as well as an increase in average days on market. You will see homes sitting (unsold on the market) longer and longer,” she said.
Trump's latest lumber tariffs will also impact the B.C. housing market, Johnson said.
“British Columbia will certainly feel a little more of the burden of any lumber rate increases,” he said.
Allegretti said the “right time to buy” depends on the needs of a particular household. While the recovery will be gradual in the fall, buyers shouldn't be surprised to find price wars reigniting as more buyers pull out.
“When the market starts to correct, you immediately see a wave of buyer demand come back into the market and start to put pressure because sellers are not moving quickly enough to offer the properties needed to meet all the demand coming in,” she said.
However, it is unlikely that a seller will offer the price for their home that they would have received at the peak of the post-pandemic housing market.
“Homes that are priced right will definitely sell faster. But everyone needs to be realistic about the fundamentals of today's market,” Allegretti said.
That realization is now dawning on some sellers, she said.
“Sellers are slowly but surely realizing the true value of their home. Homes in Toronto today are about 12 per cent lower than they were in the spring of 2022,” she said.
Johnson said families looking to upgrade to a larger home will also be waiting to see what renewal rate they can get on their current mortgage.
“You have about 1.8 million Canadian mortgages that are due for renewal over the next year,” he said.
