It’s been more than four years since Canada’s housing boom came to an abrupt end in 2022, and throughout that period the perennial question hanging over the market has been, how much farther will it fall?
Now, a handful of economists are cautiously floating the ‘b’ word, positing that we may finally be nearing the bottom.
They’re careful not to signal a recovery. They repeatedly caution against expecting one. Instead, they suggest the market’s long, drawn out correction may simply be reaching its end.
“Canada’s housing market is stabilizing — dare we say bottoming,” BMO Capital Markets senior economist Robert Kavcic in a July 17 note to clients, titled Bottom Fishing in Canadian Housing. He said that lower borrowing costs, rising incomes and more balanced market conditions have helped prices find a floor .
Kavcic believes the housing cycle has already worked through several of the factors driving the downturn: excessive speculation during the pandemic boom, aggressive interest rate hikes by the Bank of Canada, a multi-year decline in prices, and more recently, a sharp pull-back in residential construction as pre-sales disappeared and projects were shelved.
The next phase, he argues, is one where lower prices and reduced supply gradually begin to rebalance the market.
His forecast comes with caveats though.
“To be sure, there are pockets where weakness will continue well into 2027 (see the Toronto condo market), and we don’t believe that conditions will dictate a sharp recovery,” he said.
Kavcic isn’t alone.
Ben Rabidoux, founder and president of Edge Realty Analytics, says housing market bottoms rarely present as a dramatic turning point. Instead, they tend to emerge slowly as new supply dries up while demand gradually rebuilds.
“When you look at past housing cycles, you usually find a bottom when new supply coming into the market is constrained, and sales are at deeply distressed levels,” Rabidoux said.
Recent housing data suggest those conditions are beginning to emerge.
National home sales have risen seven per cent from their March low. New listings in Ontario fell 5.5 per cent in June from a year earlier to 43,442 properties. Active listings, also in Ontario, declined 5.1 per cent to 75,759 properties. Months of inventory — a measure of how long it will take to sell a property currently on the market at the current pace of sales — eased to 4.2 from 4.7 months year over year, according to the Canadian Real Estate Association (CREA).
At the same time, data from the Canada Mortgage and Housing Corp. (CMHC) confirms that builders continue to pull back on new projects due to years of weak demand.
In Rabidoux’s view, Ontario’s real estate market is starting to show many of the hallmarks of a bottom.
“Right now in Ontario, you’ve got no new supply coming. I mean, the chart on single-family completions is wild. We’re running at the lowest levels on record from CMHC going back to 1990, and at the same time, you’ve got home sales that, on per capita terms, are as low as they’ve been since the ‘90s,” he said.
In other words, the resale market is tightening.
“It’s actually been quietly tightening since last year,” he says. We’re at the point where sales are going to start to perk up slightly.”
Even so, Rabidoux isn’t predicting a recovery — not for a while yet.
“I’m not bullish. I don’t think we’re going to be here a year from now, and prices are up 20 per cent in Ontario,” he said.
RBC assistant chief economist Robert Hogue, also sees early signs of a shift in market conditions, though he cautions that previous recovery attempts failed to gain traction.
“I counted about four false starts of a recovery. So hopefully the fifth is the one,” he said.
Hogue points out that inventories in Ontario and B.C. have stopped climbing over the past several months, which he views as an encouraging sign, though not enough to suggest a robust recovery.
“The bottom is probably behind us, but we should not expect any kind of recovery to be very strong or quick. I think it’s going to be gradual and probably very bumpy,” he said.
Even so, Hogue said he still needs more evidence before declaring the correction definitively over.
“Lingering risks include weak consumer confidence and the potential for unexpected economic shocks. “We don’t know until we’re on the other side.”
Canada’s national housing agency is reluctant to use the “b-word” at all.
Kevin Hughes, the agency’s deputy chief economist, said it deliberately avoids trying to identify market bottoms because they’re only obvious in hindsight.
“Turning points are incredibly difficult to identify while you’re living through them. You really only know you’ve reached one after you’ve moved beyond it,” he said.
Instead, CMHC’s latest housing outlook, released July 22, continues to describe a market that is adjusting rather than recovering.
The agency expects activity to remain subdued through next year as affordability challenges , slower population growth and economic uncertainty continue to weigh on demand. Ontario and B.C. are expected to remain the weakest markets, while the Prairie provinces are projected to outperform.
Hughes cautions that affordability remains a significant obstacle despite lower mortgage rates and softer house prices. Many younger Canadians continue to delay major life decisions — including buying a home , starting a family or moving out on their own — because housing costs remain out of reach.
Whether economists ultimately conclude that Canada’s housing market bottomed in 2026 may not be known for months or even years.
The irony, Rabidoux says, is that the most likely outcome may be the least satisfying for almost everyone. Rather than another boom or bust, he expects years of relatively flat prices.
“It’ll frustrate both bulls and bears,” he said.
• Email: shcampbell@postmedia.com