TD Economics has sharply lowered its 2026 forecast for home sales and prices, saying it no longer expects either to rise this year after weak performance over the past two quarters.

It now expects sales to fall 1.8 per cent year-over-year, on average, and home prices to edge down 0.3 per cent nationally.

As of December, TD had forecast a 9.3 per cent year-over-year increase in home sales for 2026, along with a 4.1 per cent rise in average home prices.

Economist Rishi Sondhi said it will likely take most of the year for housing activity to recover from first-quarter losses, as sales remain constrained by a subdued economy, heightened uncertainty and ongoing cost-of-living pressures.

“While severe weather in Central and Atlantic Canada weighed on activity early in the year, weakness was also evident in B.C., where conditions were more temperate,” he said in a report.

The report gave Ontario and B.C. the steepest downgrades for sales and prices after “significant” first-quarter declines, saying potential buyers in those provinces still face significant affordability challenges and are likely waiting for the market to bottom out.

WATCH | Canadian housing market remains sluggish heading into spring:

Canadian housing market remains sluggish heading into spring

The Canadian housing market stayed sluggish in February with the average home price down by 4.8 per cent over last year and experts aren’t expecting much to change even with a slight thaw in the spring.

In its previous projections, TD expected home sales in Ontario and B.C. to rise 13 per cent and 15.1 per cent, respectively. It now expects Ontario to see 3.2 per cent fewer transactions, while activity in B.C. is forecast to dip 0.2 per cent lower.

Prices are expected to fall four per cent in Ontario, compared with December’s forecast of a 0.6 per cent gain, and decline 1.2 per cent in B.C., compared with the previously expected 3.6 per cent rise.

Sondhi said pent-up demand “has yet to re-emerge as quickly as previously expected” in those provinces, suggesting further price declines may be needed to spur activity.

He cautioned that risks remain, including a broader or more prolonged escalation of tensions in the Middle East, which could “support activity in oil-producing regions but weigh more heavily on oil importers.” That could potentially unleash pent-up demand in Ontario and B.C. “faster or more forcefully than expected,” Sondhi said.

He added that upcoming CUSMA negotiations also loom large for the broader economy and the housing market.

The report forecasts a rebound in Canadian home sales in 2027, driven by improved economic and job market conditions, which could also lift the national average price.

TD currently expects home sales to jump 9.6 per cent year-over-year in 2027, with average prices increasing 2.7 per cent.