Canadian housing market braces for prolonged volatility amid rate hikes and trade uncertainty

The Canadian housing market faces continued uncertainty as rising bond yields and geopolitical tensions push interest rates higher. Inflation fears, fueled by the US-Iran conflict and the ongoing Ukraine war, are making economic forecasts increasingly difficult. TD Economics recently revised its 2026 home sales forecast, now predicting a 5.3% decline nationwide, a sharper drop than previously anticipated.

Aled ab Iorwerth, deputy chief economist at Canada Mortgage and Housing Corporation (CMHC), warned that the trade dispute and energy challenges are complicating the outlook. While the US Federal Reserve raised rates last month, ab Iorwerth cautioned against immediate rate hikes in Canada, citing economic uncertainty and inflation slightly above target.

Mortgage delinquencies and arrears remain a concern, particularly in Toronto and southern Ontario, though they are not yet at crisis levels. Alberta, however, has seen contained arrears amid a strong economy. The combination of trade chaos and political uncertainty could further strain the housing market in the coming months.