Canadian home prices edged lower in the third quarter as trade tensions with the United States and concerns about the economic outlook kept buyers on the sidelines, with Royal LePage forecasting modest price growth by the end of 2026.
The real estate company’s aggregate home price declined 0.8 per cent year over year to $810,000 in the third quarter, while prices fell 0.6 per cent from the second quarter, according to its House Price Survey and Market Forecast.
Economic uncertainty weighs on housing activity
Royal LePage President and CEO Phil Soper said sales activity stalled across most major markets during the quarter, despite a promising start to the summer following momentum in late spring. He said uncertainty surrounding the economy and the possibility of higher mortgage rates continued to discourage prospective buyers.
"The Canadian housing market has spent the past three months treading water, with home prices largely flat and national sales volumes on track to finish 2026 slightly below even the sluggish pace of 2025," said Soper. "Autumn, the second-busiest season of the year, typically injects energy into the market. This year, economic uncertainty and concern that mortgage rates could move materially higher are keeping would-be buyers on the sidelines.
"With more homes to choose from and little pressure to act quickly, buyers can afford to wait – and uncertainty gives them a reason to. Yet, buyers have advantages that were hard to imagine during the pandemic-era frenzy. Prices have retreated from their peaks in most markets, and a larger selection of homes for sale gives buyers more time, more choice and greater negotiating power. After years in which scarce housing inventory forced buyers to compete fiercely, today's market offers room to be selective. The opportunity is there; the confidence to act remains elusive."
The national figures combine resale and newly built homes across 65 of Canada's largest real estate markets. The median price of a single-family detached home fell 0.5 per cent year over year to $856,500, while the median condominium price declined 1.5 per cent to $571,900.
Regional results varied. Greater Toronto and Greater Vancouver recorded annual price declines of 3.7 per cent and 4.0 per cent, respectively, while Greater Montreal posted a 2.9 per cent increase. Montreal prices also rose 0.5 per cent from the previous quarter, while markets across the Prairie provinces were comparatively stable during the summer.
Soper said the trade dispute between Canada and the U.S. continued to undermine confidence in the economy and housing market. Negotiations between the two countries broke down in late August, followed by the U.S. announcement of a 50 per cent tariff on billions of dollars in Canadian goods. Canada responded with counter-tariffs, and the dispute added to existing levies affecting several major Canadian export industries.
"Global economic turbulence and escalating trade tensions with our neighbours to the south continue to weigh on buyer psychology," said Soper. "Canadians' confidence in buying and selling real estate is obviously tightly linked to the perceived stability of the country's relationship with our closest trading partner. For many buyers, the hesitation is less about what they can afford today than how secure they feel about tomorrow. Buyers have more negotiating power, but little control over the forces shaping their confidence."
The federal government has continued efforts to diversify Canada's trading relationships and attract investment in infrastructure, energy and technology. Soper said those efforts could help strengthen confidence over time, although they would not immediately offset the effects of U.S. trade measures.
"Efforts to attract investment and strengthen trading relationships beyond the United States are encouraging steps toward a more resilient Canadian economy," noted Soper. "Diversification cannot immediately offset the damage from American trade actions, but it can reduce our vulnerability over time. For housing, the promise is straightforward: as Canadians gain confidence in the country's economic prospects, they gain confidence in their own financial security. Turning that promise into investment and jobs will help give buyers a reason to move forward."
Borrowing costs and mortgage renewals add pressure
Interest rate expectations are another factor shaping the outlook. The Bank of Canada has held its target for the overnight lending rate at 2.25 per cent for the past year, but inflationary pressures have raised concerns about the potential for further increases.
The central bank has two scheduled rate announcements remaining in 2026, on Oct. 28 and Dec. 9. Soper expects rates to remain unchanged through the end of the year, with an increase more likely in early 2027, depending on whether inflation pressures broaden and accelerate.
"The Bank of Canada faces a difficult balance: an economy that needs support, and war-driven cost pressures from abroad that will make inflation harder to contain," said Soper. "I expect the Bank to hold rates through the remainder of 2026, with an increase more likely in early 2027. The deciding factor will be whether those inflation pressures broaden and accelerate."
The prospect of higher borrowing costs has not prompted the anticipated increase in buyer activity, even as rising bond yields put upward pressure on fixed mortgage rates. Soper said uncertainty is outweighing the incentive for buyers to secure current borrowing rates.
Mortgage renewals are also a concern for existing homeowners. According to Royal LePage's 2026 Mortgage Renewal Survey, 38 per cent of Canadians with a mortgage on their primary residence expect their monthly payments to rise at renewal, while 35 per cent report greater anxiety about their upcoming renewal than they felt during the previous one.
The share expecting higher payments is greater in Vancouver, at 45 per cent, and Toronto, at 39 per cent. Anxiety is highest among homeowners who renewed in 2021 or 2022, when interest rates were at record lows.
"It's no surprise that homeowners who locked in during the era of rock-bottom rates are the most uneasy about renewal," said Soper. "When the overnight rate was sitting at 0.25 per cent, most people understood those conditions were temporary. Even so, there's a big difference between expecting higher payments and actually seeing the new number on your renewal statement. The good news is that most of these borrowers qualified under a stress test at rates of five per cent or higher. In other words, they've already shown they can manage payments at today's levels."
Household debt remains another source of financial pressure. Non-mortgage debt reached $712.2 billion in the second quarter of 2026, up 4.8 per cent from a year earlier. Delinquency rates on non-mortgage debt that was at least 90 days overdue eased to 1.76 per cent from 1.79 per cent in the previous quarter, but remained above the 1.70 per cent recorded a year earlier.
Political uncertainty and fourth-quarter forecast
Political developments are also contributing to hesitation among prospective buyers and sellers. Municipal elections across several provinces, Quebec's recent election of a minority government and a referendum on Alberta's future within Canada are adding to uncertainty surrounding housing decisions.
"Elections can give buyers and sellers reason to pause while they assess what a change in government might mean for them," said Soper. "This fall, some of the questions facing voters go well beyond tax policy or housing programs. A home is a long-term commitment to a community. Uncertainty about the future of that community, or the province's place in Canada, can make buyers reluctant to put down roots."
Royal LePage forecasts that Canada's aggregate home price will increase 1.0 per cent in the fourth quarter of 2026 compared with the same period last year. The company revised its previous forecast downward after third-quarter results came in weaker than expected.
"Price softening in the third quarter offset some of the gains made earlier in the year. We expect a modest pickup in sales activity through the remainder of the fall, although persistent trade uncertainty could delay that improvement," concluded Soper. "The conditions for recovery are in place. Canada's housing market is on a detour, not a derailment."