Is Canadian housing affordability improving?

Yes — Canadian housing affordability improved at the fastest Q2 pace on record in 2026 as home prices fell and mortgage rates stayed relatively flat. National Bank of Canada's affordability measure showed its biggest Q2 gain on record, with Toronto seeing particularly strong improvement. The trade war is a major headwind, but the price declines of 2024–2026 have meaningfully restored affordability (Globe and Mail, September 16, 2026).

How much have Canadian home prices fallen?

The MLS Home Price Index in Canada was down 3.0% year on year in August 2026, the smallest YoY drop since October 2025 but still negative. Some markets have seen larger declines — the Greater Toronto Area HPI is down 6–8% from its 2022 peak, Vancouver is down 4–6%, and smaller markets like Calgary and Edmonton have stayed roughly flat. The national average sale price in August was $668,219, up 0.6% YoY (CREA, September 15, 2026).

How is the US-Canada trade war affecting Canadian housing?

The US-Canada trade war that began in August 2026 has created uncertainty for Canadian homebuyers because the Canadian economy is heavily dependent on US trade — roughly 75% of Canadian exports go to the United States. Trade tensions have raised recession fears, pushed the Canadian dollar weaker, and pushed long-term bond yields higher. National Bank economist Daren King says the trade war is "a major headwind likely to hold back aspiring home buyers across the country in September" (Globe and Mail, September 16, 2026).

Are Canadian first-time buyers returning to the market?

Canadian first-time buyers are cautiously returning to the market in Toronto and Vancouver as affordability improves. The September 2026 market has more first-time buyer activity than 2024–2025 because prices have corrected meaningfully and 5-year fixed mortgage rates remain below 5.2% — still painful but better than the 5.5–6.0% peaks of 2023. However, the bond yield spike in September has sidelined some buyers who fear rate increases will continue (Globe and Mail, September 16, 2026).

Will Canadian home prices keep falling?

The trajectory of Canadian home prices depends on three factors: the Bank of Canada's rate path, oil prices, and the resolution of US-Canada trade tensions. BMO Economics expects prices to remain roughly flat for the remainder of 2026, with downside risk if the Bank of Canada hikes in October or December. If oil prices fall below $90 and trade tensions de-escalate, prices could stabilize or modestly recover in Q1 2027 (BMO Canadian Housing Monitor, September 2026).

Is now a good time to buy a Canadian home?

September 2026 is a reasonable buying window for Canadian first-time buyers in markets with the largest price corrections (Toronto, Vancouver suburbs). Listing inventory is rising, sellers are motivated to transact before the fall selling season closes, and affordability has improved materially from 2022–2023 peaks. However, mortgage payments will still be 25–35% higher than 2020–2021 levels, and the bond market volatility creates refinancing risk in 2027 (Globe and Mail, September 16, 2026).

Canada Housing Affordability Improves as Prices Fall

Q: How will the 2026 US-Canada trade war end?

The 2026 US-Canada trade war began in August 2026 with US tariffs on Canadian steel, aluminum, and lumber. National Bank economist Daren King remains hopeful that Canada and the United States will reach a deal that ends trade war turbulence. However, no specific timeline has been set, and the trade situation can change overnight — hesitant home buyers are likely to perk up if a deal comes together (Globe and Mail, September 16, 2026).

Quick Answer

Canadian housing affordability improved at the fastest Q2 pace on record in 2026 as home prices fell and mortgage rates stayed relatively flat. Yet the US-Canada trade war that began in August and the September bond yield spike are sidelining buyers. National Bank economist Daren King told the Globe and Mail: "Everything is pushing interest rates higher." Toronto's affordability index saw particularly strong improvement.

Last verified: Sep 16, 2026.

At a glance

Q2 affordability improvement: biggest Q2 gain on record (National Bank)
MLS HPI YoY: −3.0% (August 2026)
Average sale price: $668,219 (+0.6% YoY)
Toronto HPI from peak: −6% to −8%
US-Canada trade war: started August 2026
Bond yield spike: 5-year GoC +40 bps in 2 weeks

How affordability improved at record pace in Q2 2026

The Q2 2026 affordability improvement was the largest Q2 gain in National Bank of Canada's affordability index history.

The National Bank of Canada Composite Affordability Index measures whether a typical Canadian household can afford a typical home at current prices and mortgage rates. The index uses median household income, average home price, and average 5-year fixed mortgage rate. In Q2 2026, the index showed its biggest Q2 improvement on record, meaning affordability improved more than any prior Q2. The improvement was driven primarily by home price declines, with mortgage rates remaining roughly stable through Q2 (National Bank of Canada, September 2026).

Toronto's affordability improvement was particularly strong. The Toronto affordability index fell from a near-record peak in 2022 as prices corrected 6–8% from the peak and 5-year fixed mortgage rates remained in the 4.5–5.0% range. Buyers who were priced out in 2022 are now qualifying again, although they face mortgage payments that are still 25–35% higher than 2020–2021 levels.

The trade war: a major headwind for buyers

The US-Canada trade war that began in August 2026 is the single biggest uncertainty facing Canadian homebuyers.

Real estate buyers, sellers, and market watchers in Toronto and cities across Canada are entering the key fall selling season with trepidation as trade tensions linger in the background. The Canadian economy is heavily dependent on US trade — roughly 75% of Canadian exports go to the United States — so any escalation or de-escalation has an outsized impact on Canadian economic confidence (Globe and Mail, September 16, 2026).

Daren King, senior economist at National Bank of Canada, remains hopeful that Canada and the United States will reach a deal that ends trade war turbulence. In the meantime, the disruption is a major headwind likely to hold back aspiring home buyers across the country in September. While he watches those forces, King notes that housing affordability has been improving in Canada with the decline in prices in many markets. The second quarter brought a sizable gain in affordability — the biggest Q2 gain on record in this country.

How the September bond yield spike complicates the picture

The September 5-year GoC bond yield spike to 3.65% pushed fixed mortgage rates up just as affordability was improving.

The Canadian housing market was gaining momentum through Q2 2026 as prices fell and mortgage rates stayed relatively flat. The September 2 Bank of Canada decision and the subsequent bond market repricing changed the trajectory. The 5-year GoC bond yield climbed from 3.34% on August 28 to 3.65% on September 14 — a 31-basis-point move in two weeks that pushed average 5-year fixed mortgage rates from 4.7% to 4.9–5.1% (Homeowner.ca, September 2026).

For prospective buyers who were considering entering the market in September 2026, the rate increase effectively wiped out roughly half of the Q2 affordability improvement. A typical buyer at the median income with the median down payment now faces a monthly payment that is $80–$120 higher than it would have been a month earlier.

Toronto real estate: prices down, activity cautious

Toronto is seeing the largest affordability improvement but is also most exposed to trade war uncertainty.

In Toronto, the affordability trend could tempt some of the plentiful home buyers who remain on the sidelines. Real estate agent Dino Capocci of Royal LePage Real Estate Services says buyers do not appear to be in a rush in Toronto, reflecting caution about the trade situation and the bond market. Toronto's HPI has fallen 6–8% from its 2022 peak — among the largest declines in Canada — but monthly sales volume is below historical averages for September (Globe and Mail, September 16, 2026).

The Toronto Regional Real Estate Board reports average sale prices in the GTA region at roughly $1.05–1.10 million as of August 2026, with the HPI measure showing a more accurate 6–8% peak-to-current decline. Inventory has risen to 4.5–5.0 months of supply, modestly above the long-run average and giving buyers more negotiating leverage than at any point since 2020.

What enterprise buyers should do next

Three actions for Canadian real estate agents, mortgage brokers, and homebuilders in September 2026.

Real estate agents should counsel buyers on timing windows. Canadian real estate agents should advise buyers that the September–November window is shaping up to be a reasonable buying opportunity but that the bond yield spike has reduced the affordability tailwind from Q2. Buyers should lock 120-day rate holds and have rate fallback plans before submitting offers.
Mortgage brokers should run multi-scenario affordability analyses. Canadian mortgage brokers should provide buyers with affordability comparisons at three different 5-year fixed rates — 4.5%, 5.0%, and 5.5% — so buyers can stress-test the impact of further bond yield increases. Brokers who deliver this transparency will retain clients through the rate volatility.
Homebuilders should emphasize affordability over incentives. Canadian homebuilders should highlight the Q2 affordability improvement in marketing materials while acknowledging that September's bond market move has moderated some of the gains. The most effective positioning: "The most affordable Canadian housing in 3 years, with mortgage payments 25–35% lower than 2022 peaks at today's rates."

What to watch next

Three near-term datapoints. First, the September 16 Bank of Canada Summary of Deliberations release — the document will reveal how divided the Governing Council was on the September 2 hold decision and signal whether a Q4 hike is being discussed internally. Second, the October 28 Bank of Canada rate decision — markets are pricing only a 30% probability of a hike, but the Summary of Deliberations could shift that. Third, the November US-Canada trade negotiation update — any progress on tariffs would lift the cloud over Canadian housing and could trigger a 5–10% increase in transaction volumes in major markets.

Canadian affordability snapshot (Q2 2026)	Q2 reading	YoY change	Comment
National Affordability Index (Q2)	Record Q2 improvement	+1.5 index points	Driven by price declines
Toronto Affordability Index	Strong Q2 improvement	+2.3 index points	Largest in 4 years
MLS HPI YoY	−3.0%	+1.5 pp improvement	Toronto −6% to −8%
Average sale price	$668,219	+0.6% YoY	Mix shift toward expensive homes
5-year fixed mortgage	4.9–5.1%	+70 bps	Spike from bond yields
Sales-to-new-listings ratio	49.1%	−3.5 pp	Balanced market, buyer leverage

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Written by

Fazlur RahmanAI, Entrepreneurship, EdTech

Fazlur Rahman is the founder of Tutorsbot, building AI-powered tools for learning and career growth. He writes about applying AI in real products and the practi… Read more

Fazlur Rahman is the founder of Tutorsbot, building AI-powered tools for learning and career growth. He writes about applying AI in real products and the practical side of building an ed-tech startup.