RBC Says Canadian Housing Won't Fully Recover Until 2027 Despite Recent Gains

Home resales have climbed for four consecutive months, inventory has stopped surging, and prices are falling more slowly than they were a year ago. The floor is in. What isn't in is the recovery. According to RBC Economics, the Canadian housing market is stuck in a holding pattern between the worst of the correction and a meaningful rebound, and that holding pattern is expected to last until 2027.

The bank's projection reflects a market that has stabilized without accelerating. Resale volumes remain below their ten-year seasonal averages. The CREA Home Price Index declined 3.3% year-over-year as of July 2026, a smaller drop than the double-digit losses of 2023 but hardly the stuff of a boom. Ontario's MLS benchmark fell 3.9% over the same period. These numbers sit between crash and recovery.

Why 2027 Is the Target Year

The timeline hinges on two factors: interest rates and employment. The Bank of Canada's easing cycle, which began in mid-2024, has brought the overnight rate down from 5.00% to 2.25% as of September 2026. That's progress, but rate cuts take twelve to eighteen months to filter through to housing behavior. Buyers who could not qualify at 5% can qualify at 2.25%, but the gap between that rate and the sub-2% figures locked in during 2020 and 2021 remains wide. A 47-year-old engineer in Mississauga who refinanced at 1.79% in 2021 now faces renewal at roughly 4.50%. That spread matters.

Employment is the other engine. RBC's report cites "brightening job prospects" as a precondition for recovery. If the labor market softens more than expected in late 2026, the 2027 timeline gets pushed. If unemployment climbs while mortgage renewals peak, distressed inventory could return, undoing the supply stabilization that has kept prices from collapsing further.

The Inventory Buffer

National months of inventory stood at 4.7 months in July 2026, the lowest reading of the year and slightly below the long-term average of 5 months, according to CREA data. That's a buffer. It prevents bidding wars, but it also prevents catastrophic price drops. Greater Vancouver sits 26.2% above its ten-year seasonal average for listings as of August 2026. Montreal listings climbed 18% year-over-year in the same month, while sales fell 13%. Buyers are arriving too slowly to absorb the inventory quickly. The leveling off of supply suggests sellers have accepted the new normal and are no longer flooding the market in panic. It also suggests that when demand does return, the market will tighten faster than many expect. The supply shortfall in new construction, starts remain well below the levels required by Canada's population growth targets, ensures that any demand surge will meet a ceiling quickly.

The Psychological Floor

A correction and a recovery are separated by belief, not by data alone. Buyers have stopped waiting for prices to drop significantly further. That psychological shift is visible in the four consecutive months of rising resales through July. Prices have stabilized in most markets, and in some cases have begun to inch upward. A detached home in Vancouver West now sits at $1.78 million to $1.82 million, effectively flat from late 2025.

The challenge is that stabilization does not mean affordability. Lower rates improve monthly carrying costs, but they also remove the downward pressure on prices. The qualification gap remains high. Many buyers are waiting for the cumulative effect of multiple rate cuts to offset principal costs that have not budged. That cumulative effect takes time. Hence 2027.

The mortgage stress test remains a hurdle. Even with rates falling, the buffer it imposes ensures that buyers qualify at a rate higher than the one they will actually pay. That gap narrows as rates drop, but slowly.

The market is moving sideways, not frozen.