CMHC downgrades housing outlook

Key Takeaways:

• CMHC now projects home sales (457,200) and average prices ($675,200) to contract in 2026 before returning to gradual growth in 2027–2028.
• Annual housing starts are forecast to drop to 241,400 units as high building costs and weak buyer demand slow down new developments.
• Asking rents are easing in major urban centers like Toronto, Vancouver, and Montréal as new rental inventory comes online, though overall affordability remains tight.

The Whole Story:

The Canada Mortgage and Housing Corporation (CMHC) released its 2026 Housing Market Outlook Mid-Year Update, projecting national home sales and average prices to drop over the remainder of the year. The downgrade marks a sharp pivot from the agency’s earlier optimism, as high borrowing costs, slow population growth, and trade friction with the U.S. continue to keep buyers on the sidelines.

According to the updated forecast, national resale transactions are expected to drop to 457,200 units in 2026—down from 470,314 in 2025. The average home price is slated to slide to $675,200 from last year’s $679,543. While the agency expects housing demand and prices to slowly recover in 2027 and 2028, total sales are projected to stay well below the 10-year historical average.

CMHC Deputy Chief Economist Kevin Hughes highlighted that price cuts haven’t been deep enough to outweigh economic anxiety. “Price reductions have not yet been enough to bring demand back into the market as economic uncertainty, income growth and borrowing conditions all have played a role in sidelining buyers,” Hughes said. “We expect conditions to improve over the medium-term, however, housing construction should remain suppressed as the industry factors in today’s elevated inventories and weaker demand.”

New residential construction is pulling back alongside home purchases. Housing starts are projected to drop to 241,400 units in 2026, down from 259,028 in 2025, as builders contend with unsold inventory, high financing costs, and elevated material prices. The slowdown is hitting high-density multi-family projects in Ontario and British Columbia particularly hard, where condo starts are dropping to historic lows.

On the rental side, the market is beginning to cool following a historic surge in purpose-built rental completions. Rising vacancy rates in Toronto, Vancouver, and Montréal are slowing rent growth—specifically for asking rents on vacant units—offering tenants some relief. However, CMHC notes that overall rental affordability remains stretched as average rents on occupied units continue to outpace income gains.

Regional Housing Dynamics

The national real estate picture shows a growing split across provincial markets:

• Ontario & British Columbia: Facing the steepest headwinds, driven by slow population growth, persistent affordability limits, and an oversupply of unsold condo units that is dragging down both sales and new starts.
• Prairie Markets (AB, SK, MB): Leading the country in relative strength, sustained by steady employment, lower entry prices, and strong interprovincial migration.
• Quebec: Experiencing balanced market conditions, with home sales and prices expected to post modest, stable gains.