Canadian Real Estate Association cuts housing forecast as oil-driven rate pressures cool market

The Canadian Real Estate Association has downgraded its housing market forecast for 2026, citing weaker-than-expected sales and a recent surge in mortgage rates tied to global oil-driven inflation.

The revision follows a slower start to the year, with home sales underperforming expectations through the first quarter.

Oil shock reshapes outlook

CREA had initially expected stronger activity, driven by pent-up demand — particularly from first-time buyers.

But that outlook shifted in March, when rising oil prices pushed inflation higher and increased the likelihood of a rate hike from the Bank of Canada.

That, in turn, drove up bond yields and caused fixed mortgage rates to climb — dampening buyer activity.

Senior economist Shaun Cathcart said global instability played a direct role in the revised forecast.

“We’ve had to change that and lower it because of the situation in the Middle East and the oil shock,” he said.

Prices and sales remain soft

National housing data reflects the cooling trend.

The average home price in March came in at $673,084, down 0.8 per cent compared to the same time last year.

Meanwhile, the MLS Home Price Index declined 0.4 per cent month-over-month — marking the 16th straight monthly drop.

Prices were lower year-over-year in major markets like British Columbia, Alberta and Ontario, offsetting gains in other regions.

Sales activity also showed limited momentum, with transactions essentially flat month-over-month and slightly below March 2025 levels.

Buyers waiting on the sidelines

Spring is typically the busiest season for real estate, but uncertainty around interest rates is keeping many buyers cautious.

Cathcart said some potential buyers may delay decisions, especially if they believe current rate increases could be temporary.

Broader geopolitical tensions — including conflicts affecting global oil supply — are also weighing on confidence.

“It’s these massive global disruptions that continue to unfold,” he said, adding that uncertainty is shaping buyer behaviour much like it did during earlier economic shocks.

Inventory still below normal

At the end of March, there were 167,524 properties listed across Canadian MLS systems — up slightly from last year but still more than 10 per cent below the long-term average.

That suggests supply remains relatively tight, even as demand softens.

Modest growth still expected

Despite the downgrade, CREA still expects modest growth in 2026.

The association forecasts the national average home price will rise 1.5 per cent to $688,955, with little to no growth in B.C., Alberta and Ontario, and stronger gains elsewhere.

Home sales are projected to increase by about one per cent overall this year, with further gains expected in 2027.

However, CREA notes the outlook could improve if the current oil shock proves short-lived — underscoring how closely Canada’s housing market remains tied to global economic forces.