Canada's housing market has been a defining economic and social story for the better part of two decades. The combination of historically low interest rates, population growth driven by immigration, and a structural undersupply of housing in major urban centres produced price appreciation that outpaced income growth in every major Canadian city and made homeownership an increasingly remote prospect for a generation of Canadians.
The interest rate cycle that began in March 2022, when the Bank of Canada initiated what became the most aggressive tightening cycle in the institution's history, reversed that dynamic sharply. By mid-2023, benchmark prices in Toronto had declined more than 20 percent from their early-2022 peak. Vancouver followed a similar trajectory, though with less severity. The correction was painful for recent buyers but created the conditions — lower prices, rising inventory, more negotiating room — that buyers had been waiting for.
What Has Changed in 2026
The Bank of Canada's decision to hold its overnight rate at 4.25% for a third consecutive meeting in early 2026 has been interpreted by market participants as a signal that the tightening cycle is complete. Fixed mortgage rates, which move in anticipation of rate expectations rather than in direct response to the Bank's decisions, have stabilised and in some terms begun to decline modestly. Five-year fixed rates from major lenders are now being offered in the mid-4 percent range, compared to the 5.5 to 5.9 percent seen at the cycle's peak.
New listings nationally are up approximately 18 percent year-over-year, according to the Canadian Real Estate Association's most recent data. In Toronto, the months-of-supply figure — a measure of how long it would take to sell all listed properties at the current rate of sales — rose to 4.2 months as of February 2026, compared to less than one month during the frenzied peak of 2021 and 2022. A balanced market is generally considered to be between four and six months of supply, suggesting Toronto is at or near that threshold for the first time in years.
City-by-City Picture
Toronto's benchmark price, as measured by the Toronto Regional Real Estate Board, is down 8.2 percent year-over-year as of February 2026. Detached homes have seen the largest correction; condominiums, particularly smaller investor-grade units, have seen the deepest declines due to a combination of increased supply from completed pre-construction projects and softening rental demand in certain segments. The first-time buyer market in the 905 region — the area surrounding the city — has seen increased activity as affordability improves relative to the 416.
Vancouver's market has been more resilient than Toronto's, partly because of the continued appeal of the city to both domestic and international buyers and partly because the land constraints surrounding the city limit supply responses to a degree not seen in Toronto's suburban periphery. The benchmark price in the Greater Vancouver area is approximately flat year-over-year, with the detached market down modestly and the condo market marginally positive.
Calgary and Edmonton, which benefited from interprovincial migration during the worst of the affordability crisis in Ontario and British Columbia, continue to see demand that exceeds supply in many segments. Both cities remain significantly more affordable on a price-to-income basis than Toronto or Vancouver, and continued in-migration from other provinces is providing a floor under prices.
Montreal has seen a quieter correction than Toronto, partly because prices in the city never reached the same extreme multiples relative to local incomes. The market remains more accessible for first-time buyers than in the other major cities, and the city continues to attract buyers priced out of Toronto who are willing to accept a longer commute to affordable housing.
What Buyers Should Know in 2026
The combination of more supply, lower prices relative to peak, and stabilising mortgage rates has created what many buyers' agents describe as the most favourable conditions for first-time buyers in a decade. That does not mean prices are low in absolute terms — they are not, and affordability remains challenged relative to incomes and pre-2015 historical norms. But the bidding war environment that made purchasing almost impossible at peak has largely dissipated, and buyers now have time to do proper due diligence, negotiate on price, and make conditional offers that include inspection and financing provisions.
The First Home Savings Account (FHSA), introduced in 2023, continues to be underutilised. Eligible Canadians can contribute up to $8,000 per year to a maximum of $40,000, with contributions tax-deductible and qualifying withdrawals tax-free — a combination of RRSP and TFSA benefits specifically for first-time homebuyers. Anyone considering a home purchase within the next five years should open an FHSA immediately to begin accumulating room.