Key Takeaways

• Home sales posted their strongest monthly gain of 2026 in May.
• Home prices are stabilizing after months of declines.
• Inventory remains balanced at 4.8 months nationally.
• Lower borrowing costs are helping bring buyers back to the market.
• Single-family homes are outperforming the condo sector.
• The Bank of Canada is expected to remain on hold for now.

Why This Matters

After more than a year of uncertainty, Canada’s housing market appears to be shifting from stabilization into recovery. Lower mortgage rates, improved affordability, and more realistic pricing are encouraging buyers to re-enter the market.

For homebuyers, this could be a window of opportunity before competition increases further. For sellers, market conditions are becoming healthier and more balanced.

Sales Activity Continues to Improve

May delivered the strongest increase in home sales so far this year, signaling renewed confidence among buyers.

Several trends suggest momentum is building:

• Stronger sale-to-list price ratios
• Faster selling times
• Slowing price declines
• Improved affordability in many markets

Ontario and British Columbia, where prices have corrected the most, are seeing growing interest from buyers who have been waiting on the sidelines.

Inventory Remains Balanced

New listings fell 1% in May and were down nearly 8% from a year ago.

National inventory sits at just over 200,000 properties, slightly below long-term averages. Months of inventory declined to 4.8 months, close to the historical balanced-market level of five months.

This suggests neither buyers nor sellers currently hold a significant advantage nationally.

Home Prices Are Finding a Floor

The national MLS® Home Price Index slipped just 0.1% in May, the smallest monthly decline since late 2025.

Year-over-year prices remain down 4.2%, but the pace of decline continues to slow.

This stabilization is important because it helps restore confidence and encourages more market activity.

Condos Still Face Challenges

While detached homes continue to see solid demand, many condo markets remain under pressure.

Factors affecting condo demand include:

• Higher ownership costs
• Softer rental markets
• Reduced investor activity
• Slower population growth due to lower immigration targets

However, improving financing conditions should gradually support condo demand over time.

What Could Happen Next?

Housing conditions appear more favourable heading into summer.

Falling oil prices and easing bond yields may reduce inflation concerns and support lower borrowing costs. If inflation remains contained, the Bank of Canada is expected to keep rates unchanged through the remainder of 2026.

The biggest risk remains inflation. Stronger-than-expected inflation data could delay future rate cuts and temporarily slow housing activity.

Conclusion

Canada’s housing market is showing clear signs of improvement. Sales are rising, prices are stabilizing, and inventory remains balanced. While some regional and condo-market challenges persist, the overall trend suggests the market is regaining its footing.

For buyers, improving affordability and stable prices may create opportunities before activity accelerates further. For sellers, growing confidence and stronger demand could lead to better market conditions through the second half of 2026.

FAQ

Is Canada’s housing market recovering in 2026?

Yes. Rising sales, stabilizing prices, and balanced inventory levels suggest the market is moving from stabilization toward recovery.

Are home prices still falling?

Prices remain slightly below last year’s levels, but monthly declines have slowed significantly, indicating prices may be finding a floor.

Will mortgage rates fall in 2026?

While no outcome is guaranteed, markets currently expect the Bank of Canada to remain on hold, with future rate decisions depending largely on inflation data.

Is now a good time to buy a home in Canada?

Many buyers are benefiting from improved affordability, lower prices compared to peak levels, and less competition than during previous market cycles.

Cedric Pelletier – Mortgage Associate
Maximal Mortgages