Is Canada’s housing market inflection point being declared too soon?

The October housing data from the Canadian Real Estate Association (CREA) has arrived at a moment when the country is searching for direction. After more than a year of turbulence marked by rate whiplash, population recalibration, labour softness, and an uneasy global trade environment, the market’s next chapter matters more than any monthly release. 

The latest numbers reveal a market that refuses to sink and yet cannot ascend with conviction either. The economy is pressing against the limits of what households can reasonably absorb, while policymakers test the reach of their interventions. Households are weighing their choices through the lens of interest rates, yet their decisions are also shaped by the broader economic and political forces that now surround the market.

Amid this complex backdrop, the data does offer some hope. October delivered a modest rise in sales, a comparatively lean stream of new listings and the first signs that underlying demand is warming despite the economic chill in the air. 

The result is what some claim to be an ‘inflection point’ that deserves careful interpretation, because the forces influencing 2026 are more structural, more political, and more global than the monthly figures imply.

Sales edged higher for the sixth time in seven months, a pattern that would be unremarkable in a growing economy but appears significant when labour markets are uneven and population growth is deliberately slowing. A 0.9 per cent month-over-month increase does not usually signal momentum. In this context, it can. The rate environment seems to have finally passed the psychological threshold where ordinary buyers re-enter the conversation, a dynamic CREA has alluded to in its own commentary.

Year-over-year activity remains weaker, underscoring the caution that still governs purchasing behaviour. The return of buyers is real, although tempered by the broader economic uncertainty. 

New supply contracted by 1.4 per cent in October. The drop is small, yet its consequences are not. With sales on an upward trend, albeit slowly, and new listings thinning, the sales-to-new listings ratio moved to 52.2 per cent compared to 51.0 per cent in September. The shift appears modest on its face, although it signals a gradual tightening in a market that has spent much of the year operating below its long-term average of roughly 55 per cent.

This tightening matters because it is unfolding in an economy that does not outwardly reward risk. Households are absorbing a labour market with elevated unemployment and rising part-time work. Investors are confronting declining rent inflation as immigration caps curb the pace of population growth. Yet the market tightens regardless, which reinforces a simple truth. End-user demand, shaped by real family needs rather than speculative intent, is rebuilding.

Total inventory reached 189,000 listings at the end of October, a level that sits almost precisely on the long-term seasonal average. The stability conceals important crosscurrents. Inventory is higher than a year ago because 2024 subdued demand across most of the country, yet the figure has stopped climbing. Just as significant is the measure of months of inventory, which held at 4.4 for the fourth consecutive month, the lowest level since January. The long-term norm is five months. The line between balance and tightening draws closer each quarter.

The moderation in population growth carries implications here. Slower inflows prevent inventory from tightening too rapidly, which shields the market from the conditions that once produced bidding frenzies. At the same time, fewer new arrivals also limit distress sales and involuntary listings. The result is a market that neither floods nor dries, but instead oscillates within a narrow band that often precedes a turning point.

The MLS Home Price Index (HPI) inched 0.2 per cent higher on a month-over-month basis in October. The annual decline narrowed to 3 per cent, the smallest year-over-year contraction since March. The national average price, now $690,195, is 1.1 per cent lower than a year earlier.

These movements suggest that the market may have completed much of its downward adjustment. Prices remain stable enough to quiet predictions of further decline, yet measured enough to avoid any impression of premature strength.

The housing outlook cannot be understood without the wider economic frame. According to Statistics Canada, the country’s labour market gained roughly 60,000-70,000 jobs in the most recent monthly figures, yet the broader pattern reveals an economy leaning on part-time work while unemployment remains near 7 per cent. Wage gains of around 4 per cent help sustain basic demand, although they do not create the financial confidence that fuels aggressive bidding or high-risk investment.

The global environment casts its own shadow. The 2026 United States-Mexico-Canada Agreement (USMCA) review introduces uncertainty at a delicate moment. Canada’s manufacturing and export sectors depend heavily on stable trade conditions, and any turbulence could reduce hiring intentions in key provinces. Households are sensitive to these risks. They monitor trade headlines as closely as rate announcements because both influence job security and long-term affordability.

Population policymaking has also played a central role in shaping market sentiment. Immigration caps on temporary residents have slowed Canada’s population growth more sharply than the country has seen in decades. The effect on rental markets has been immediate, with investor sentiment adjusting accordingly. Rent inflation has moderated. Vacancy rates have edged higher. The urgency that pushes renters into ownership has softened, though in some tight sub-markets, it persists.

Recent federal reforms carry implications for both the supply and demand sides of the housing market.

The removal of GST for eligible first-time buyers purchasing new homes introduces direct relief at a moment when affordability has narrowed to its tightest margins. The measure received concentrated attention during the most recent budget debates because it reduces the upfront tax burden on a cohort that has struggled to enter the market. Its reach is limited to builder-delivered new homes rather than the resale stock where most transactions occur, yet it may refine the financial calculus for a fraction of first-time purchasers who have been constrained by high construction costs and the elevated thresholds imposed by the stress test.

Ottawa’s decision to condition new federal housing funds on provincial commitments to reduce development charges represents a deeper structural shift. It seeks to replace fragmented local incentives with a framework that favours jurisdictions willing to align development fees (which have reached unbelievable levels in regions like the GTA, shown in the table below) with national housing objectives. The transition will be gradual. Municipalities must amend by-laws, developers must re-evaluate project economics, and lenders must regain conviction that pro-supply policies will endure. These steps will not alter household formation in 2026, although they lay the groundwork for a more credible and efficient supply environment in the years that follow.

Source: Rescon Financial & Valery

CREA points to interest rates approaching stimulative territory. Borrowing costs have fallen enough to pull hesitant buyers back into the conversation, yet not enough to unleash unchecked demand. The market prepares for winter, historically a quieter season, while attention shifts toward the ever-anticipated spring. The question is no longer whether buyers will return. The question concerns the scale and confidence of their re-entry. The answer lies in the interplay of policy and economics.

If I were to venture a forecast, mindful of the fact that some expect only doom from me, I would say the spring will bring a market that advances with restraint rather than excitement.