Canada’s housing market is in ‘new normal.’ It looks like the ‘old normal’

With the Bank of Canada holding interest rates again, economists and real estate experts say the housing market’s “new normal” may be looking more and more like the “old normal” from before the COVID-19 pandemic.

“What we have now with more supply in the market, like more inventory, homes for sale, and this is what I would consider a little bit more — not everywhere in Canada — but generally speaking more return to the old normal before the pandemic,” said Robert Hogue, assistant chief economist at RBC.

“Actually, probably a lot more before the pandemic with a bit more time for buyers to make decisions.”

Much of the original hesitation from buyers waiting to enter the market in early 2025 was due to the uncertainty of looming and implemented tariffs by the U.S., Hogue said.

He added in the months since, the perspectives of Canadians have changed and the lack of “doom and gloom” is bringing back some homebuyers.

National home sales rose 2.8 per cent in June, building on a 3.5-per cent rise in May, the Canadian Real Estate Association (CREA) said earlier this month.

However, the CREA’s senior economist, Shaun Cathcart, cautioned while homes sales saw a boost — including a 17.3-per cent rebound in the Greater Toronto Area since April — the national picture is a “carbon copy” from May sales figures.

Hogue notes that positivity and growing confidence will benefit the housing market in the long-term, especially as RBC does not expect any further rate cuts.

Get breaking National news

For news impacting Canada and around the world, sign up for breaking news alerts delivered directly to you when they happen.

There are still some challenges, such as continued U.S. uncertainty, but he said some energy is returning.

“What we’ve seen in recent months is a return to that recovery is still very kind of gentle, just more of a turning point taking place,” he said.

“Barring any major bad news on the trade front that would send more kind of ice cold water on expectations and confidence, we should see that recovery going forward.”

Some mortgage brokers in Canada say despite concerns over U.S. tariffs and the economy, they’re still seeing people entering the market.

“Every mortgage broker that I speak to is busy right now because house prices are high, interest rates aren’t great but people are still buying,” said Hannah Martens, mortgage broker and president of the Canadian Mortgage Brokers Association Atlantic.

“I really do feel that even though we aren’t in a perfect market right now, and I don’t think there will ever be a perfect market, people, if they’re ready, then should come into the market whenever they’re ready.”

Even with Canadians trying to buy their first or a new home, there are still barriers and affordability may be a key factor.

“We still have affordability issues, but I think even for those who have the ability to purchase right now, they’re not. We need them to pull the trigger,” said Mary Sialtsis, a licensed mortgage broker in Ontario.

“Maybe it does take the Bank of Canada to start dropping the prime lending rate because it is that psychological impact, because I do have buyer clients out there actively shopping right now, but they’re not actually pulling the trigger and making an offer.”

Sialtsis said what may be needed even more is an adjustment of expectations.

“I know that some of the buyers that are out there shopping are just thinking, ‘Well, you know, I’ll wait until I can get a better deal,’ and it starts to become unreasonable,” she said.

“For sellers, I really think they need to adjust their expectations and they need to, I’m sure their realtors are advising them of what comparable sales are in their neighbourhood, they need to adjust their expectations accordingly.”

Canadians hoping for low mortgage rates seen during the COVID-19 pandemic may be out of luck, but Royal LePage’s Anne-Elise C. Allegritti said some people appear to be realizing this.

“I think Canadians have adapted to this sort of, being roughly the new normal in terms of borrowing rates. Could they go down a little bit more, sure, but I don’t think anyone is expecting them to reach those rock-bottom rates that we saw during COVID and that’s a good thing,” said Allegritti, director of research and communications at Royal LePage.

“I think sometimes our perspective can be skewed because of this extreme that we experienced not too long ago and this feels now like the opposite extreme, but it really is a leveling off.”