Existing owners who might otherwise trade up are “out of sorts,” Butler says, because their realtors are telling them their homes are worth less than they expected. And renters hoping to buy “still can’t make the math work,” he adds, with prices too high relative to incomes.

“For most first-time homebuyers, the prices still have to come down or their incomes have to go up,” he said. “That’s it.”

At the same time, Butler says the investor class has evaporated. “Absolutely no one is buying a property to rent it out, to flip it, to renovate it. Zero. Gone.” Soper adds that federal caps on foreign students and temporary workers have hollowed out the rental demand that condo investors rely on.

The result is a market with fewer buyers, more hesitation, and transactions bogged down by the kind of conditions and inspections that vanished during the pandemic boom. “The buyer is much more judicious, much more careful, much more picky,” Butler said.

All three experts point to the U.S.–Canada trade conflict as the central force weighing on economic confidence.

Tal says the freeze in business investment offers a useful parallel for understanding household behaviour. “You can cut interest rates to zero — they’re not investing because you don’t know what will happen tomorrow with a tariff,” he said. One CEO told him the only thing they needed was clarity: “Give me a number. So at least I know where I am.”

Beyond the external threat of tariffs, Tal points to a specific domestic headwind that will keep a lid on the recovery in 2026: a tougher mortgage renewal environment.

He says the renewal wave of 2025 was “much ado about nothing” because borrowers could refinance, but 2026 will be different. Homeowners renewing next year locked in rock-bottom rates in 2021, and in markets like Ontario and B.C., their home values have since dipped — removing the refinancing cushion they might have relied on.

Tal estimates this affects about 5.5 per cent of outstanding mortgages, a group he says will face a “significant” payment shock of 40 per cent or more.

Both Soper and Tal say that even without a resolution to the trade conflict, the psychological shock it imposed will fade — just as pandemic fears did in late-2020, with the market rebounding long before vaccines arrived (though that trend was also driven by a move out of cities).

“People get used to it, people adjust, people adapt,” Tal said. At the margin, that can draw some buyers back.

Tal and Soper both see U.S. political realities driving a potential end to the trade conflict next year —  an outcome Tal says would lead to a marked improvement in the housing market. Change, though, is generally expected to be gradual. Butler sees no chance of a price surge next year. Soper expects transaction volumes to keep rising only gradually. Tal foresees 2026 as a “transition year” — slow in the spring, better in the fall, and still heavily shaped by whether tariff uncertainty clears.

“The uncertainty is a major factor,” Tal said. “And that’s why this fog is so thick.”

John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf.

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