Canada’s housing market may be deeper into a downturn than many realize.
According to new insights from BMO Capital Markets, the current correction is shaping up to be the largest since the 1990s, with little indication that conditions will improve in the near term.
Even more concerning, when adjusted for inflation, home prices in Canada have effectively gone nowhere for nearly a decade.
Weak Demand Continues as Spring Market Approaches
Heading into what is typically the busiest season for real estate, demand across Canada remains unusually soft.
One of the most closely watched indicators, the sales-to-new-listings ratio (SNLR), recently hit its lowest February level in over a decade, signaling weak buyer activity relative to available supply.
While winter months are often slower, the current slowdown appears more persistent.
According to Robert Kavcic, the broader trend is clear:
The housing market is experiencing a long, slow downturn, with conditions varying across regions and property types. The spring market may offer more clarity, but expectations remain cautious.
Home Prices Have Been Flat for Nearly 9 Years (Adjusted for Inflation)
Canada’s housing boom between 2020 and early 2022 was historic, but the correction that followed has been just as significant.
- Prices surged 56.7% between April 2020 and February 2022
- The average home peaked around $827,600
- Since then, prices have fallen 20.1%, dropping to approximately $661,100 as of February 2026
This decline has effectively erased gains made since early 2021.
However, the bigger story lies beneath the surface.
When adjusted for inflation, home values have dropped nearly 30%, meaning homeowners have seen no real price growth for almost nine years.
A Correction That Could Mirror the 1990s
While a decade of stagnation may sound extreme, historical data suggests it may not be unusual in the context of Canadian real estate cycles.
Following the housing downturn of the 1990s, it took roughly two decades for prices in markets like Toronto to recover on an inflation-adjusted basis.
Now, similar patterns may be emerging again.
Kavcic notes that this is the first time since that era that Canada has seen a correction of this scale, raising concerns that the current downturn could be longer and more prolonged than expected.
More Downward Pressure Could Be Ahead
Looking forward, the outlook remains uncertain.
Rising inflation could continue to erode real home values, even if nominal prices stabilize. At the same time, weaker demand and shifting demographics may limit the pace of any recovery.
Kavcic has previously warned that:
- The housing market peaked in 2021
- Buyers who entered at that time faced elevated risk
- A full recovery in activity may not occur until later in the decade
With inflation expected to increase in the coming months, the bank does not anticipate a meaningful reversal in real price declines anytime soon.
What This Means for Canada’s Housing Market
Canada’s housing correction is no longer a short-term adjustment. It is becoming a longer-term structural shift.
Key takeaways:
- Demand remains weak heading into spring
- Prices have declined significantly from peak levels
- Inflation is quietly eroding real estate value
- Recovery may take years, not months
For buyers and sellers, this signals a market that may continue to move slowly, with uncertainty playing a major role in decision-making throughout 2026 and beyond.
References
Canadian Real Estate’s Biggest Crash Since The ‘90s To Worsen: BMO – Better Dwelling
BMO Capital Markets. (2026). Canadian housing market analysis and outlook.
Canadian Real Estate Association (CREA). (2026). National housing market statistics. Retrieved from https://stats.crea.ca
Kavcic, R. (2026). Canadian housing market commentary. BMO Capital Markets
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