Canada Housing Forecast Cut Amid Oil Shock Impact

The Canadian Real Estate Association has lowered its housing market forecast for 2026, citing rising mortgage rates and weaker-than-expected home sales in the first quarter of the year. The downgrade reflects growing uncertainty in the market, driven largely by global economic pressures and a recent spike in oil prices.

According to CREA, inflation linked to higher oil prices increased expectations of a potential interest rate hike by the Bank of Canada. This led to a rise in bond yields, which in turn pushed fixed mortgage rates higher. As borrowing costs increased, many potential homebuyers delayed their plans, slowing down market activity during what is typically a busy spring season.

CREA had initially expected stronger sales in 2026, anticipating that pent-up demand—especially from first-time buyers—would boost the market. However, those expectations have now been scaled back. The association reported that national home sales remained nearly flat in March, with a slight month-over-month decline and activity running below levels seen a year earlier.

Home prices have also shown signs of continued weakness. The national average home price in March stood at $673,084, representing a small year-over-year decline. Meanwhile, the MLS Home Price Index recorded its 16th consecutive monthly drop, highlighting ongoing pressure on housing values. Price declines were particularly notable in major markets such as British Columbia, Alberta, and Ontario.

Experts say uncertainty surrounding global events, including geopolitical tensions and fluctuating oil prices, is making buyers more cautious. Many are choosing to wait before entering the market, especially with the possibility that interest rates could remain elevated or increase further.

Despite the downgrade, CREA still expects modest growth in the housing market over the full year. The association forecasts that the national average home price will rise by about 1.5% in 2026, reaching approximately $688,955. Home sales are also projected to increase slightly, though growth is expected to remain limited.

Looking ahead, CREA suggests that the market could improve if global conditions stabilize and the current oil shock proves temporary. However, for now, uncertainty continues to weigh heavily on both buyers and sellers, keeping Canada’s housing market under pressure.