Bank of Canada Housing Market Risk: Are Prices Still Falling

If you’ve watched Canadian home prices climb, plateau, and then start to slide, you’re not alone. The Bank of Canada has flagged housing market risks for years, and the latest data shows those warnings aren’t fading.

Home price decline duration: 4 years (March 2025, RBC) ·
Risk warning source: Bank of Canada (May 2025) ·
Property bubble status: Uncharted territory (2019, Wikipedia)

Four key data points reveal the core dynamics driving the Bank of Canada’s housing market risk narrative.

Are Canadian home prices coming down?

The short answer is yes, but the picture varies by region. According to RBC Economics (2025 outlook), national resale transactions are projected to rise 12% to 551,000 units in 2025, but prices will increase only 1.4%—slower than the 2.9% gain in 2024. That modest rise comes after a prolonged decline that began in 2021.

Four-year trend of declining home prices (RBC)

• RBC reports that March 2025 marks four consecutive years of falling home prices. The national aggregate RPS Home Price Index is expected to edge up just 1.4% in 2025, a slower recovery than in 2024 (RBC Economics, same source).
• CMHC echoes this, noting in its 2026 outlook that demand is projected to gain momentum while sales stay below historical averages, with prices showing modest gains after falling in 2025 (CMHC).

Regional differences in price changes

Not all markets are declining at the same pace. BMO Economics reported in September 2025 that Canada’s housing market remained balanced overall (BMO Economics). However, cities like Toronto and Vancouver still command average prices above $1 million, while smaller centres have seen larger percentage drops. For perspective on selling secondary homes, many Canadian snowbirds are also selling U.S. homes.

Impact of Bank of Canada interest rate decisions

The Bank of Canada has kept its policy rate at 3.0% as of May 2025. Lower rates are expected to reduce ownership costs and unlock pent-up demand, according to RBC. But the Bank’s own financial stability analysis warns that high household debt—which rose nearly 3.5% since the pandemic—remains a vulnerability (Bank of Canada).

The implication: prices are coming down, but the recovery is likely to be gradual. Buyers may find better negotiating power in markets where inventory is still elevated.

How much do you have to make a year to afford a $1,000,000 house in Canada?

The income needed to buy a $1 million home depends heavily on the mortgage rate and down payment. Under current conditions, you’ll need a gross annual income in the range of $160,000 to $200,000, according to standard lender stress tests.

Income required based on current mortgage rates

• With a 20% down payment ($200,000) and a mortgage rate of around 4.5%, the monthly payment would be roughly $4,500. Lenders typically require that total housing costs not exceed 32% of gross income, meaning an annual income of about $170,000–$180,000 (CMHC guidelines).
• Higher rates push that threshold above $200,000. Variable rates have declined over the past two years and are expected to stay stable in early 2026 following the Bank of Canada’s lowered policy rate (CMHC).

Down payment requirements and stress test

For homes over $1 million, the minimum down payment is 20%—that’s $200,000 on a $1M property. The mortgage stress test (qualifying at the greater of 5.25% or contract rate + 2%) further raises the income bar. A borrower with a 4.5% contract rate must qualify at 6.5%, which reduces borrowing capacity by roughly 15–20%.

Regional variations in affordability

The Bank of Canada defines its housing affordability index as the share of disposable income a representative household puts toward housing costs (Bank of Canada). In Toronto and Vancouver, that ratio is typically above 50%, meaning even high-income earners feel squeezed. For a closer look at a smaller market, see the Qualicum Beach Real Estate guide.

The pattern: income requirements are highest in Canada’s priciest cities, while markets like Edmonton or Winnipeg offer far more breathing room for the same monthly payment.

What devalues a house the most?

Real estate agents and appraisers point to location as the single biggest factor. But even a great location can’t offset certain property flaws.

Location and neighborhood factors

• Proximity to amenities, school quality, and local crime rates directly affect value. A home in a declining neighbourhood or near a noisy highway can lose 10–20% compared to similar homes in a better block (Bank of Canada references this as a structural factor).

Property condition and deferred maintenance

A roof with less than 10 years of life left, an outdated electrical system, or foundation cracks can reduce a home’s value by tens of thousands of dollars. The cost to replace a roof alone runs $5,000–$15,000, and buyers factor that in when negotiating.

Market conditions and overpricing

Overpricing relative to comparable sales is often the fastest way to devalue a home. A property that sits on the market for weeks without offers typically sells for 5–10% below its initial asking price. In a declining market like the one the Bank of Canada is tracking, that discount can widen.

The catch: while you can fix a leaky faucet or repaint walls, you cannot change the location or the broader market trend. Sellers who price realistically in a balanced or declining market avoid the stigma of a stale listing.

Can a 70 year old woman get a 30 year mortgage?

Yes, it is possible—but with restrictions. Lenders in Canada do not have a hard age cap, but most require that the mortgage term end before the borrower turns 85 or 90.

Lender policies on age and mortgage term

• A 70-year-old can qualify for a 30-year amortization if her income and credit profile meet standard requirements. However, many lenders will limit the term to a shorter period—say 10 or 15 years—to ensure the loan is paid off by age 85 or 90.
• Income sources matter: pension income, RRSP withdrawals, and investment returns are all considered (CMHC guidelines).

Alternatives for senior borrowers

If a conventional 30-year mortgage is denied, seniors can explore reverse mortgages or home equity lines of credit (HELOCs). Reverse mortgages allow homeowners aged 55+ to access equity without monthly payments; the loan is repaid when the home is sold.

Impact of income sources (pension, savings)

The Bank of Canada’s definition of household income for affordability includes all sources (Bank of Canada). A retiree with a steady pension and significant savings can show strong ability to pay, even if her gross annual income is under the typical threshold.

What this means: age alone is not a barrier. The key is demonstrating sufficient cash flow and a plan to retire the debt within the lender’s acceptable time frame.

What is the hardest month to sell a house?

January is consistently the slowest month for home sales across Canada. Cold weather, post-holiday budgets, and fewer buyers in the market all contribute to lower activity.

Seasonal trends in Canadian real estate

• Data from real estate boards across the country shows that January listings often sit longer and sell for less than homes listed in spring. The number of transactions in January can be half the volume seen in April (BMO Economics notes that the market remains balanced, but seasonal patterns persist).

Why winter months are slower

Fewer buyers are house-hunting during the holidays and in deep winter. Snow and ice also make it harder to show curb appeal. Sellers who list in December or January often have to price more aggressively to attract offers.

Best times to list for quick sale

Spring (March through May) is the peak selling season. Warmer weather, longer days, and families wanting to move before the next school year create strong buyer demand. The Bank of Canada’s rate announcements also influence timing—buyers often rush to close before anticipated rate hikes.

The takeaway: if you can wait until March, you’ll likely see more foot traffic and a higher final sale price. If you must sell in January, price it 5–10% below spring comparable sales to stimulate offers.

Timeline: Key events in Canada’s housing market risk story

• April 2019 – Bank of Canada states housing market is in “uncharted territory” (Wikipedia).
• March 2025 – RBC reports four consecutive years of declining home prices (RBC Economics).

This timeline shows how warnings from the central bank have escalated over six years, yet the market remains in a prolonged adjustment phase.

What’s confirmed and what’s still unclear

Voices from the market

“Housing-market imbalances and elevated household indebtedness have the potential to amplify pandemic-related economic stress.”

Bank of Canada, Staff Analytical Note (April 2021)

“Lower interest rates will reduce ownership costs and help unlock pent-up demand, but the recovery will be gradual.”

RBC Economics, Housing Market Outlook (2025)

These two perspectives—one from a regulator warning of fragility, the other from a major bank forecasting a slow recovery—frame the central tension in today’s housing market.

Summary: What homebuyers and sellers need to consider

The Bank of Canada’s risk assessment is not a prediction of a crash; it’s a structural warning that household debt remains high and the housing market is sensitive to interest rate changes. For Canadian homebuyers, the choice is clear: wait for rates to drop further and risk more competition, or act now in a slower market with greater negotiating power. Sellers in major markets should price realistically and consider listing in spring to maximize exposure.

Frequently asked questions