The Canadian real estate market is dynamic, and understanding future trajectories is vital for buyers and sellers alike. Earlier this month, the Canadian Real Estate Association (CREA) unveiled its resale housing market forecast for 2025 and 2026, projecting a market upswing potentially commencing as early as this spring. To unpack these projections, Shaun Cathcart, CREA’s Director and Senior Economist, Housing Data and Market Analysis, recently joined the REAL TIME podcast to provide an in-depth analysis of the factors shaping the market outlook.

‍

Spring Market Reawakening?

When asked about the direction of the Canadian housing market, Cathcart emphasized that while a "reliable crystal ball" remains elusive, data provides a compelling narrative. CREA's 2025 forecast is grounded in rigorous data analysis and expert assumptions, not speculation.

The forecast anticipates a market resurgence, particularly in the spring. After a period of subdued activity, influenced by elevated prices and increasing interest rates, the market is poised for revitalization. Cathcart characterized the recent market as being in "hibernation," but indicators suggest an imminent awakening.

Key data points driving this anticipated market surge include:

• Interest Rate Landscape: The Bank of Canada's interest rate adjustments are pivotal. After reaching a peak to combat inflation, the overnight rate currently stands at 3.25 percent. This is within the Bank's estimated neutral range of 2.25 to 3.25 percent, signaling a shift away from aggressive tightening. While one more rate cut is potentially anticipated this year, the crucial trigger for market activity is expected to be the Bank signaling the end of rate cuts. This is anticipated to encourage buyers who are waiting for rate stabilization to secure mortgages, especially the favored 5-year fixed rate.
• Sales Forecast: While projecting a "good increase" in sales, the forecast indicates that sales are still expected to be "a couple of years away from just getting back on track with what normal would be." This suggests a significant but measured market recovery in terms of transaction volume.
• Price Forecast: Despite increased sales, the persistent supply crisis in the Canadian housing market is expected to drive "some gains" in prices. This underscores that while affordability may improve slightly with rate adjustments, the fundamental supply-demand imbalance will continue to exert upward pressure on home values.

‍

Beyond National Averages

It's critical to recognize the diverse nature of the Canadian housing market. The forecast highlights a notable regional shift—an "UNO reverse card" compared to historical patterns.

Historically, Toronto and Vancouver often dictated national market trends. However, in the current high-interest rate environment, British Columbia and Ontario are experiencing the "coolest markets." Sales in these provinces are currently "way below average," and price growth has been stagnant for an extended period.

In contrast, the rest of Canada is experiencing "pretty hot" market conditions. This includes:

• Alberta, Saskatchewan, and Manitoba: These Prairie provinces are exhibiting strong market momentum.
• Quebec and New Brunswick: Experiencing notably robust market activity.
• Nova Scotia and Prince Edward Island: Also demonstrating seller's market dynamics, although Halifax in Nova Scotia experiences some moderation due to higher price points.
• Newfoundland and Labrador: Witnessing significant price appreciation.

This regional variation emphasizes the importance of localized market understanding. To quantify market "hotness," Cathcart references the "months of inventory" metric. The long-term average for Canada is 5 months of inventory. A seller's market, characterized by strong upward price pressure, is defined as having inventory below 3.6 months. Currently, regions outside of BC and Ontario largely fall into seller's market territory.

‍

The Housing Crisis and Long-Term Trends

The podcast discussion extended to the broader context of the Canadian housing crisis. Cathcart affirms the reality of the crisis, noting the dramatic shift in affordability. He points out that in the 1950s, a single-income family of six could afford a detached bungalow in Midtown Toronto, a stark contrast to current realities. The crisis is characterized by a transition from "less affordable" to "not affordable," a qualitative shift, not just a quantitative one.

Long-term trends and potential solutions discussed include:

• Declining Homeownership Rate: After rising from roughly 60% to 70% between 1971 and approximately 2012, Canada's homeownership rate has been declining. Current estimates suggest it may have fallen to around 65% or even lower by 2025. This reversal is partly attributed to a structural shift with increased construction of purpose-built rental apartments in recent years after decades of underbuilding in this sector.
• Housing Shortage Estimates: Addressing the crisis requires a significant increase in housing supply. Estimates vary but are substantial. The Parliamentary Budget Officer (PBO) estimates a need for 1.4 million additional homes by 2030 just to address the current deficit. CMHC's estimate is even higher, at 3.5 million homes over the same period to restore affordability to levels seen 20 years ago. Current construction rates are far below these targets, highlighting the scale of the challenge.
• The "Missing Middle" and Innovative Solutions: Addressing the crisis requires a focus on building diverse housing types, particularly the "missing middle"—townhomes, semi-detached homes, and larger apartments suitable for families. Cathcart emphasizes the potential of manufactured housing and innovative construction technologies like modular construction, mass timber, and 3D printing to accelerate building and improve productivity in the construction sector, which currently lags in productivity growth compared to other industries. He notes that only "2 to 3 percent of construction right now is these things when it should be, like, half."

‍

Implications for You and the Realtor Advantage

For prospective homebuyers, the forecast suggests a potentially narrowing window to buy in less competitive markets, particularly in BC and Ontario. As interest rates stabilize and potentially decrease, and as spring listings emerge, market activity is expected to intensify. Understanding regional market nuances is crucial for making informed decisions.

For potential home sellers, especially in regions outside of BC and Ontario, the forecast is encouraging. Seller's market conditions are anticipated to persist and potentially strengthen, creating favorable selling opportunities.

For Realtors, the 2025 forecast points to a potentially busier market. In some areas, this means navigating a return to more balanced conditions, while in others, it involves managing ongoing seller's market dynamics. The data and insights from CREA's forecast, as discussed in the REAL TIME podcast, provide invaluable context and data-driven perspectives for Realtors to effectively guide their clients.

‍

Coldwell Banker Horizon Realty is dedicated to providing you with the most current market analysis and expert guidance. Understanding the data-driven insights of the 2025 housing market forecast is essential for making informed real estate decisions. Whether you are considering buying or selling, our experienced agents are equipped to help you navigate the evolving market landscape and achieve your real estate objectives. Contact us today to discuss your specific needs and how these market trends may impact your real estate journey.

‍

(Note: This article is based on CREA's 2025 Housing Market Forecast and data insights from the REAL TIME podcast featuring Shaun Cathcart. For the most up-to-date data and region-specific information.)