Will Canadian Housing Prices Keep Falling in 2026? What Real Estate Experts Just Revealed
The number that has Canadian homeowners and potential buyers talking: $973,289. That’s the current average selling price for a home in Toronto—and for the first time since 2021, it’s fallen below the psychologically significant $1-million mark.
But that headline figure only scratches the surface of what’s happening in Canada’s two biggest real estate markets. According to data released Wednesday, both Toronto and Vancouver are experiencing price drops, plummeting sales volumes, and a level of buyer anxiety that’s keeping people on the sidelines despite years of improved affordability. The pandemic housing boom? It’s officially been erased.
Welcome to Canada’s housing reality check—and it might get worse before it gets better.
The Numbers That Tell the Story
Let’s break down exactly what’s happening in Canada’s hottest (or should we say, cooling) real estate markets:
Toronto’s Reality Check:
- Average home price: $973,289 (down 6.5% from January 2025)
- Average detached home: $1,277,915 (down 7.4% year-over-year)
- Sales volume: 3,082 transactions (down 19% from last year)
- First time below $1M since 2021
Vancouver’s Decline:
- Home price index: $1.1 million (down 5.7% from January 2025)
- Down 1.2% just since December
- Sales volume: 1,107 transactions (down 28% year-over-year)
These aren’t minor fluctuations or seasonal adjustments. These are substantial, sustained drops that represent a fundamental shift in Canada’s real estate landscape.
“We’ve Lost Five Years of Value”
John Pasalis, president of Realosophy Realty, put it bluntly: “We’ve basically lost five years of value. We’re back to a late 2020 pricing era.”
Think about what that means. If you bought a home in Toronto in 2021 or 2022 at the peak of the pandemic frenzy, you’ve essentially watched your investment appreciate exactly zero dollars over the past five years—or more likely, you’re underwater. The equity you thought you were building? Gone. The nest egg you were counting on? Evaporated.
For first-time buyers who stretched themselves financially to get into the market during the boom, praying that continued appreciation would justify their aggressive mortgages, this is a nightmare scenario. For sellers hoping to cash out and downsize or relocate, the reality is sobering: the value simply isn’t there anymore.
But here’s what’s genuinely puzzling economists and real estate professionals: prices are dropping despite conditions that should theoretically be bringing buyers back into the market.
The Affordability Paradox: Why Aren’t Buyers Biting?
On paper, this should be the moment when sidelined buyers finally jump in. Interest rates have dropped significantly from their 2023 peaks. Home prices have fallen substantially. Affordability has improved across multiple metrics. Inventory exists for buyers who want to be selective.
So where is everyone?
The answer, according to real estate analysts, is that buyer confidence is in the gutter—and no amount of price drops seems capable of reviving it.
A poll commissioned by the Toronto Regional Real Estate Board (TRREB) and conducted by Ipsos revealed a startling statistic: only 22% of respondents intended to buy a home in 2026, compared with 27% in 2025. That’s not stagnation—that’s active retreat from the market.
“We haven’t seen any marked movement of households back into the marketplace,” said Jason Mercer, TRREB’s chief information officer, with what might be the understatement of the year.
What’s Killing Buyer Confidence?
If it’s not high prices and it’s not high interest rates, what’s keeping Canadians from buying homes? The answer is more psychological and economic than purely financial:
1. The U.S. Trade Threat
Canada’s frayed trade relationship with the United States has created massive economic uncertainty. With threats of tariffs, renegotiation of USMCA (the United States-Mexico-Canada Agreement), and general unpredictability from America’s political leadership, Canadians are genuinely worried about the stability of the economy.
Pasalis noted that a renewal of USMCA would need to occur for consumer confidence to return in Toronto. Translation: until the trade situation stabilizes, people aren’t making the biggest financial commitment of their lives.
2. Job Security Concerns
Real estate purchases require confidence in your future income. With recession fears, corporate layoffs making headlines, and general economic anxiety, people are holding onto their cash rather than committing to 25-year mortgages.
3. The Fear of Catching a Falling Knife
When prices are rising, fear of missing out (FOMO) drives purchases. When prices are falling, fear works in the opposite direction: nobody wants to buy today only to watch their investment lose another 5-10% of value over the next year.
Why rush into a purchase when waiting a few months might save you tens of thousands of dollars?
4. The Pandemic Hangover
Pasalis identified a crucial psychological shift: “The overriding sentiment is anxiety and uncertainty, and people just aren’t in a rush to make a decision.”
During the pandemic, fear motivated buyers to rush into purchases at inflated prices—fear of being priced out forever, fear of missing the opportunity, fear of being left behind. Today, that same emotion has reversed. Fear now motivates inaction, caution, and waiting.
Have Prices Dropped Too Far?
Here’s where things get really interesting. Pasalis suggested that fear may have pushed prices “unreasonably low”—meaning the market might have overcorrected in the opposite direction.
Think about it: Toronto and Vancouver remain Canada’s economic engines. Jobs, culture, immigration, universities, and opportunities are all concentrated in these cities. The fundamental demand for housing in these markets hasn’t disappeared—it’s just frozen by psychological factors rather than financial ones.
If prices have indeed dropped below their rational value based on fundamentals, we’re potentially looking at a buying opportunity—but only for those brave enough to act while everyone else is paralyzed by fear.
The challenge is that nobody rings a bell at the bottom of the market. By the time everyone agrees prices have bottomed out, they’ve already started climbing again.
What Do the Experts Predict?
The forecasts for Canada’s housing market are all over the map, which itself tells you how much uncertainty exists:
TRREB’s Outlook (Moderately Optimistic):
- Expects Toronto sales to remain weak through the first half of 2026
- Opportunity for improvement in the second half if positive economic news emerges
- Forecasts average GTA home price between $1 million and $1.03 million for 2026
- That would represent a slight increase from current levels
Canadian Real Estate Association (More Pessimistic):
- Predicted last month that Toronto prices would drop by 4.5% in 2026
- Significantly more bearish than TRREB’s forecast
Greater Vancouver Realtors (Stagnation Expected):
- Market will likely remain stagnant throughout 2026
- Pent-up demand exists but timing of re-entry is uncertain
- Chief economist Andrew Lis: “Whether it will happen in 2026 remains an open question”
The wide variance in these predictions reflects genuine uncertainty about which factors will dominate: improving affordability and lower rates pulling buyers in, or economic anxiety and trade concerns keeping them out.
The Sales Volume Collapse
While price drops grab headlines, the sales volume numbers might actually be more significant:
- Toronto: Down 19% year-over-year to just 3,082 transactions
- Vancouver: Down 28% to only 1,107 sales
These aren’t just people waiting for better prices—these numbers represent a fundamental freeze in market activity. When sales drop this dramatically, it creates a vicious cycle:
Fewer sales → Less market data → More uncertainty → Even fewer buyers willing to commit → Further price drops → More uncertainty…
Low transaction volumes also mean fewer comparable sales for appraisers and real estate agents to reference, making it harder to price homes accurately and creating more negotiation friction between buyers and sellers who have very different ideas about fair value.
Who Wins and Who Loses?
Winners:
- Patient first-time buyers with secure jobs and saved down payments who’ve been waiting years for affordability
- Cash buyers and investors who can act quickly without financing contingencies
- Renters in no rush who can continue waiting for further price drops
- Buyers relocating from lower-cost markets who have equity to deploy
Losers:
- Recent buyers (2021-2023) who purchased at peak prices and now have little to no equity
- Sellers who need to move for job relocations, family situations, or downsizing
- Homeowners relying on equity for retirement planning or other financial goals
- Real estate professionals facing dramatically reduced commissions from fewer and cheaper sales
What Should You Do?
The honest answer? It depends entirely on your personal situation, risk tolerance, and timeline.
If you’re a potential buyer:
- Affordability has improved significantly, but will it improve further? Maybe.
- Waiting has been rewarded for the past few years, but eventually the bottom arrives
- Don’t try to time the market perfectly—buy when it makes sense for your life
- Secure employment and financial stability matter more than perfect timing
If you’re a current homeowner:
- Don’t panic about paper losses unless you actually need to sell
- Real estate is a long-term investment—five-year fluctuations matter less over 25-year timelines
- If you don’t need to sell now, you probably shouldn’t
If you’re a seller who must sell:
- Price aggressively and realistically—the market has changed dramatically
- Staging, presentation, and condition matter more than ever in a buyer’s market
- Be prepared for longer listing times and negotiation
What It All Means
Is Toronto’s housing market crashing? That depends on your definition. Prices are falling, sales have collapsed, and buyer confidence is at rock bottom. But this isn’t 2008—there’s no subprime mortgage crisis, no wave of foreclosures, no fundamental breakdown in the financial system.
What we’re witnessing is a psychological correction after years of irrational exuberance. The pandemic created FOMO that pushed prices to unsustainable levels. Now, economic uncertainty and trade concerns have created a fear of commitment that’s pushing prices unreasonably low.
The truth probably lies somewhere in the middle. Toronto and Vancouver remain expensive cities with strong fundamentals. But they’re no longer the guaranteed appreciation machines they seemed to be during the pandemic boom.
For the first half of 2026, expect more of the same: weak sales, continued price softness, and lots of anxiety. Whether the second half brings recovery or further decline will depend largely on factors beyond real estate—trade negotiations, economic indicators, job market strength, and that most unpredictable variable of all: human psychology.
One thing is certain: the era of easy real estate wealth in Canada’s biggest cities is over. What comes next remains an open question—and that uncertainty is exactly what’s keeping everyone on the sidelines.
China Reopens Doors to Canadian Beef as Supply Remains Tight | Maya
