Canada housing affordability and market trends

Canada housing affordability

It’s no secret that buying a home in Canada has become increasingly difficult over the past decades. This has been fuelled further by a housing boom during the pandemic, when borrowing rates fell to a record low of 0.25%. Housing demand – and real estate prices – soared as a result, while the end of lockdown measures caused inflation to spike, peaking at a 40-year high of 8.1% in June 2022.

This prompted a rapid 10-part series of rate hikes from the Bank of Canada, which has a mandate to keep inflation below a 2% target. These took place between March 2022 and July 2023, raising the overall cost of borrowing for Canadians.

Today, the economic landscape looks dramatically different. Inflation has cooled significantly, with February’s CPI reading at 1.8%, and core measures showing broad easing. After nine cumulative rate cuts between June 2024 and October 2025, the Bank has held its overnight rate steady at 2.25% for a third time, in its March announcement. This places the policy rate at its lowest level since early 2022 and keeps the prime rate steady at 4.45%.

The Bank indicated that its next moves will depend on how these competing pressures evolve. While weaker GDP and labour market data point to a slowing economy, the risk of higher inflation tied to energy markets has made the outlook less clear. As a result, the possibility of rate hikes later in 2026 is now back in the conversation.

Bond markets have already responded to that uncertainty. The Government of Canada’s five-year bond yield has moved above 3%, putting upward pressure on fixed mortgage pricing. The lowest five-year fixed insured rate now sits around 3.94%, up from 3.79% in February.

Overall, Canada’s housing market remains cautious, but affordability is gradually improving. Softer home prices are helping create better conditions for buyers, even as economic uncertainty and job loss concerns continue to weigh on demand. For some buyers, today’s combination of cooler home prices and still-competitive variable rates may offer a better window to enter the market.

What changed in Canada’s housing affordability in March?

In March 2026, it got tougher to buy a home in most Canadian housing markets, as stable early-spring sales activity nudged home prices slightly higher. According to Ratehub.ca’s Home Affordability Report, 10 of the 13 cities analyzed became less affordable compared to February, meaning prospective buyers needed a higher income to qualify for a mortgage on an average-priced home. The decline in affordability was driven primarily by rising home prices rather than borrowing costs. Mortgage rates actually eased slightly month over month, with the average five-year fixed rate falling to 4.39% and the stress test rate dipping to 6.39%.

Halifax recorded the largest drop in affordability, as its benchmark home price rose by $13,100 to $571,700, requiring an additional $2,270 in annual income and increasing monthly mortgage payments by $61. Victoria followed a similar pattern, with a $13,500 increase in home prices pushing required income up by $2,230 and monthly payments by $60. These markets tend to be more sensitive to demand shifts, especially when supply remains limited.

Fredericton stood out as the only city to post an improvement in affordability. A $5,700 decline in home prices lowered the income required to purchase a home by $1,210 and reduced monthly mortgage payments by $32. In contrast, larger markets like Vancouver and Toronto saw slight price declines, but affordability remained strained due to their high overall home values, which continue to keep many buyers on the sidelines. Overall, the March data highlights how sensitive affordability is to even small price movements, particularly in markets where demand remains steady.

Canada housing market update for February 2026

Canada’s housing market stayed subdued in February 2026, with national home sales falling 1.3% from January, according to CREA. There were some signs of demand picking up later in the month as the spring market approached, but overall, buyers remained cautious, especially in Ontario and British Columbia where affordability is still a major challenge. Sellers also pulled back, with new listings dropping 3.9% month over month after January’s increase.

Even with slower activity, the national market became a bit tighter in February because listings fell faster than sales. Canada’s sales-to-new-listings ratio rose to 47.6%, up from 46.4% in January. That still keeps the market in balanced territory, though closer to the lower end of the usual range. 

Inventory levels also point to a balanced national picture, though conditions vary a lot by region. There were 151,850 properties listed for sale across Canadian MLS systems at the end of February, up 3.7% from a year earlier. However, that level was still 12.3% below the long-term average for this time of year, showing that while supply has improved, it has not fully returned to normal. Nationally, there were five months of inventory at the end of February, unchanged from January and in line with the long-term average. But CREA notes that this national figure masks major regional differences, meaning some local markets remain much tighter or looser than others.

Home prices continued to soften in February, although the decline was not as steep as in January. The National Composite MLS Home Price Index fell 0.6% month over month, following a 0.9% drop the month before. Compared with a year ago, the index was down 4.8%, with the biggest downward pressure coming from Ontario, British Columbia, and Alberta. The non-seasonally adjusted national average home price was $663,828 in February, down just 0.2% year over year, showing that while benchmark prices are falling, the national average has been relatively steady.

*National home data sales data for May is not yet available, as home sales data for a given month is not published until the following month. May's data will become available in mid-June upon publication of home sales figures by CREA.  

What’s the difference between benchmark and average home prices?

When reporting on housing price trends, real estate boards use two different metrics: the average home price, and the benchmark home price. These two measures provide different insights into price trends, and how the market is evolving in both the short and long term.

• The average home price is calculated by adding the sale price of all the homes sold over a period of time, and then divided by the number of transactions. This provides the average price per unit. However, because the mix of the home sold can fluctuate significantly from month to month or by year, average home price trends can be more volatile, and do not always offer an accurate portrayal of the most common home sale in a given market.
• A benchmark home price is based on an index that’s been developed based on specific housing features, and how they change in terms of demand and value to home buyers over time. This provides a more accurate picture of the most typical type of home sold in a specific market, and that has changed over time. An example of a benchmark home price in the MLS Home Price Index created and used by the Canadian Real Estate Association (CREA). This is based on more than 15 years of CREA’s proprietary MLS System data, as well as statistical models to determine the “typical” home type and value per market.

What is the sales-to-new‑listings ratio (SNLR)?

The “SNLR” stands for sales-to-new-listings ratio. It is a measure used by real estate boards to gauge the level of competition within a given housing market, and whether or not it's considered to be a “balanced” market, or more favourable to buyers or sellers. The SNLR is calculated by dividing the number of home sales by the number of newly-listed homes brought to market during a period of time. For example, if there were 500 home sales in a specific city during the month of March, and 750 homes brought to market, the SNLR would be:

(500/750)*100 = an SNLR of 66%

According to the Canadian Real Estate Association:

• A ratio of 45 - 65% is considered a balanced market. This means there is a sufficient supply of homes available for sale to meet home buyer demand. These conditions help keep home price growth stable, and buyers are less likely to encounter excessive multi-offer situations that can drive prices higher.
  
  
• A ratio below 45% is considered to be a buyers’ market. This means there is an oversupply of available homes for sale and not enough buyer demand. Home prices tend to decrease in buyers’ markets as homes often sell for less than they’re listed, and multi-offer situations are less common.
  
  
• A ratio above 65% is considered to be a sellers’ market. This defines a market where there are too few homes available for sale to satisfy buyer demand, and competition to purchase listings is fierce. Home prices are driven higher in sellers’ markets as buyers must often engage in bidding wars on the same property.

How the stress test impacts mortgage qualification

The mortgage stress test is a mortgage qualification requirement that ensures borrowers could still afford to make their payments in the case that interest rates should rise. Mortgage applicants must prove they could still afford their mortgage under the higher of the following two scenarios:

• The mortgage rate they receive from their lender, plus 2%.
  
• The Minimum Qualifying Rate (MQR), which is currently 5.25%. However, given there are no contract mortgage rates currently available at 3.25% or lower, this threshold is obsolete, and will remain so unless Canadian mortgage rates considerably decrease. 

For example, let’s say you get a mortgage rate of 5% from your mortgage lender. You would actually need to have the sufficient borrowing criteria – such as income, debt ratios, and down payment size, etc. – to qualify for a mortgage at 7%. 

The mortgage stress test also reduces the size of mortgage borrowers will qualify for. This is because when you have a higher mortgage rate, it results in a higher monthly payment to cover the additional cost of borrowing.

For example, let’s say a borrower has a household income of $100,000, and buys a home priced at $454,161, with a down payment of $50,000. However, because the borrower must qualify at a rate of 7.64%, the purchase price they’d actually qualify for would be just $387,670 – a difference of $66,691.

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