“Home sales activity remained at lower levels in March, as rising global economic uncertainty, along with a mid-month jump in fixed mortgage rates tied to incoming higher inflation, piled on to an already shaky economic start to the year,” said Shaun Cathcart, CREA’s Senior Economist. “2026 is still expected to see a modest amount of upward momentum in sales and a stabilization in prices as some pent-up first-time buyer demand enters the market, but the forecast for the year has had to be revised downward. The timing of higher mortgage rates, along with the perception they may be temporary, could keep would-be buyers away at the most active time of year – April, May, and June – as they wait for rates to come back down.”

Clearly, the War in Iran, along with its unprecedented oil price shock, has spooked households and businesses, weakening overall economic activity, especially housing, which is highly interest-rate sensitive. Interest rates have risen sharply since the war began in late February, and it is uncertain how long higher oil prices will last. The reopening of the Strait of Hormuz is highly tentative, and it will take weeks, if not months, to return oil prices to pre-war levels.

The war’s timing couldn’t be worse, as it damages the usually strong spring home-selling season.

New listings edged down a slight 0.2% on a month-over-month basis in March 2026. Lower monthly sales numbers so far in 2026 could in part be due to the fact new supply is running at the lowest levels since mid-2024.

With new supply and sales both little changed in March, the national sales-to-new listings ratio remained at 47.8%. The long-term average for the national sales-to-new listings ratio is 54.8%, with readings generally between 45% and 65% that are consistent with balanced housing market conditions.

“While the interest rate situation has recently changed, what could be a challenge for a buyer looking for a fixed rate mortgage may also be seen as more choice and less competition for those choosing a variable rate,” said Garry Bhaura, CREA’s 2026-2027 Chair. “Spring tends to be a busier time of year for the housing market, even if it may not be quite as busy as we were expecting not so long ago.”

There were 167,524 properties listed for sale on all Canadian MLS® Systems at the end of March 2026, up just 1% from a year earlier and 10.6% below the long-term average for that time of the year. Overall supply has generally been declining since May of last year.

There were five months of inventory on a national basis at the end of March 2026, unchanged from January and February and right in line with the long-term average for the measure. Based on one standard deviation above and below that long-term average, a seller’s market would be below 3.6 months, and a buyer’s market would be above 6.4 months.

The National Composite MLS® Home Price Index (HPI) edged down 0.6% on a month-over-month basis in February, not a small decline but smaller than in January.

The non-seasonally adjusted National Composite MLS® HPI was down 4.8% compared to February 2025.

With geopolitical tensions mounting and the tenuous ceasefire in Iran, potential homebuyers have postponed their purchase decisions. While there remains considerable pent-up demand, and home prices in many regions have fallen sharply, especially in Ontario, which was hardest hit by the tariffs last year and the ongoing condo supply glut. These issues are unlikely to be resolved in the near term so that housing market weakness will remain a drag on overall economic activity.

Compounding these concerns is the surge in oil prices. Gasoline prices–a very visible component of consumer spending–have skyrocketed, causing supply disruptions in nitrogen fertilizer, plastics, aluminum and helium. Price pressures will no doubt mount, leading central banks to be concerned about potential stagflation. Next Monday, we will see the CPI data for March. At this point, the Bank of Canada is likely to continue to “look through” the price pressures, hoping the war will end very soon.

Tehran’s control of the Strait choked off a globally important conduit for oil and gas, as well as the flow of vital materials such as aluminum, helium, fertilizer, and oil components used to make many plastics. Canada is rich in crude and critical minerals, a growing power in liquefied natural gas, and an important supplier of fertilizer and aluminum to the US, though Trump’s tariffs on foreign metals have disrupted the latter industry.

A chunk of global oil production has been taken offline, which could have long-term implications, as the disruption to the free passage of ships through the Strait could linger. Many analysts believe it will take weeks to restore traffic in the Strait to normal levels. These supply disruptions are reminiscent of our COVID experience.

The US sees itself as the enforcer of the free passage of ships in international waters worldwide. If the US backs away from underpinning the free passage of goods, supply disruptions will accelerate.

It was with this backdrop that Statistics Canada released this morning’s Labour Force report. Employment was little changed in March (+14,100; +0.1%) following a cumulative decline of 108,700 (-0.5%) over the first two months of 2026. The number of full-time and part-time workers both showed little variation in March.

On a year-over-year basis, employment was up by 87,000 (+0.4%) in March, largely reflecting gains over the final four months of 2025.

The employment rate—the proportion of the population aged 15 and older who are employed—was unchanged at 60.6% in March, following a cumulative decline of 0.3 percentage points in January and February. The employment rate in March was just above the recent low of 60.5% recorded in August 2025 and was down 0.3 percentage points year over year.

In March, there was little variation in the numbers of public- and private-sector employees and self-employed workers. On a year-over-year basis, the number of employees grew at a faster pace in the public sector (+1.2%) than in the private sector (+0.6%).

Among people who were unemployed in February, 15.2% found work in March. This was similar to the rate recorded in the same months in 2025 (14.7%) but was below the pre-pandemic average of 19.1% for the same months from 2017 to 2019 (not seasonally adjusted). This indicates that higher unemployment rates relative to the pre-pandemic period are mostly driven by slower hiring, rather than by increased layoffs.

The participation rate—the proportion of the population aged 15 and older who were employed or looking for work—was unchanged at 64.9%. On a year-over-year basis, the labour force participation rate was down 0.4 percentage points.

Average hourly wages surged unexpectedly to a 4.7% y/y pace, the fastest in more than a year and well up from 3.9% the prior month. Wages can be a volatile series, but that’s a big bounce, and a move that the Bank of Canada will be watching closely. Meantime, total hours worked edged up 0.2% m/m after a deep dive in February. That still left hours worked down by 0.4% annually for all of Q1. The current consensus forecast for real GDP growth of 1.5% now hinges on an improvement in productivity growth.

Employment rose in ‘other services’ (+15,000; +1.9%) in March, offsetting a similar-sized decline in February. Employment in this industry, which includes repair and maintenance services, was little changed compared with 12 months earlier.

Employment change by industry, March 2026

On the other hand, employment in finance, insurance, real estate, rental and leasing fell by 11,000 (-0.8%) in March, the first significant monthly decline since November 2023.

Although employment in health care and social assistance was little changed in March, it was up 94,000 (+3.3%) compared with 12 months earlier, the largest employment growth among industries. Over that same period, the largest employment decline among industries was in manufacturing (-44,000; -2.4%).

Bottom Line

In other news, the US CPI for March, released this morning, surged the most in nearly four years as the war with Iran sent gasoline prices skyrocketing. The CPI spiked 0.9% from February. Year-over-year inflation increased to 3.3%, the strongest pace since 2024. A record rise in gasoline prices was responsible for nearly three-quarters of the monthly advance. Core inflation rose at a slower 0.2% pace monthly pace.

The data underscore how the war in the Middle East is beginning to ripple through the global economy, worsening households’ affordability woes. Gas prices have already surged at the pump, and, according to Bloomberg News, service providers, including Delta Air Lines and the US Postal Service, have warned of price hikes ahead.

The Canadian CPI data for March will be released on Monday, April 20, before the April 29 Bank of Canada announcement. The data will undoubtedly show a spike in price pressures, but given the geopolitical uncertainty regarding how long the disruption to oil tanker traffic will last, the Bank of Canada is likely to keep its powder dry at the next meeting. There is a real risk of stagflation, so inaction is the likely outcome, for fear of worsening tepid economic growth in response to what everyone hopes is a temporary surge in oil prices.

Economic activity has slowed amid the 19-day-old war, with widespread supply disruptions. “Since the outbreak of the conflict in the Middle East, global oil and natural gas prices have risen sharply, and this will boost global inflation in the near-term. In addition to energy supply disruptions, transportation bottlenecks stemming from the effective closure of the Strait of Hormuz could impact the supply of other commodities, such as fertilizer. Financial conditions have tightened from accommodative levels. Global bond yields have risen, equity market prices have declined, and credit spreads have widened. The Canada-US dollar exchange rate has remained relatively stable.”

The labour market in both Canada and the U.S. remains soft. ” Employment gains in the fourth quarter of 2025 were largely reversed in the first two months of 2026, and the unemployment rate rose to 6.7% in February. Looking through the volatility, recent data also suggest ongoing weakness in exports. It’s too early to assess the impact of the conflict in the Middle East on growth in Canada.”

The Bank of Canada has shown its willingness to bolster the Canadian economy amid unprecedented trade uncertainty. At the same time, Canada is working hard to establish alternative trading partners. Even the vast Chinese market cannot replace the US in terms of proximity and cost-effectiveness, given the high transport costs. China has stepped up its purchases of Canadian oil to record levels. There is no single market the size of the US market to replace exports of steel and aluminum, but the prospects of rising exports to Europe and Asia will help to offset the impact of US tariffs.

The War in Iran, now in its third week, has caused a monumental oil price shock as the Strait of Hormuz is virtually shut down. Other commodity prices have also risen sharply, including natural gas, aluminum, and fertilizer prices. Consumers and businesses are tightening their belts amid uncertainty about the war’s duration.

Housing market activity has been in a long, slow downward trend. Nominal home prices have fallen 20% from their peak in the second quarter of 2022. When accounting for inflation, real home prices are down 30%, providing an enormous opportunity for first-time homebuyers.

In this environment, market-driven interest rates have risen. The 5-year bond yield is once again attempting to break through 3%. The 2-year bond at 2.72% is well above the 2.25% overnight rate, and the Canadian dollar is rising. Lenders have recently increased fixed mortgage rates, which will be more popular if people generally expect rates to rise.

The key to the outlook is the continuation of CUSMA. We will likely suffer several more months of uncertainty before we know the fate of the trade agreement. In the meantime, PM Carney will continue to encourage trade deals in non-US countries.

In February, the employment rate—the proportion of the population aged 15 and older who are employed—fell by 0.2 percentage points to 60.6%, marking the second consecutive monthly decline. The employment rate in February was just above the recent low of 60.5% observed in August 2025 and was down 0.4 percentage points year over year.

The number of people working full-time declined by 108,000 (-0.6%), offsetting growth recorded over the previous two months. At the same time, there was little variation in the number of people working part-time in February.

The number of employees in the private sector fell by 73,000 (-0.5%) in February, the second consecutive monthly decline. These declines offset gains observed in October and November 2025. Compared with 12 months earlier, the number of private sector employees was virtually unchanged in February.

The number of public sector employees and the number of self-employed workers were both little changed last month.

The participation rate—the proportion of the population aged 15 and older who were employed or looking for work—fell by 0.1 percentage points to 64.9% in February. It was down 0.4 percentage points year over year.

The employment decline in February was spread across services-producing industries (-56,000; -0.3%) and goods-producing industries (-28,000; -0.7%).

In services-producing industries, the largest decline was in wholesale and retail trade (-18,000; -0.6%). Employment in this industry has trended down since October 2025, with a cumulative decline of 52,000 (-1.7%) over this period.

In goods-producing industries, employment edged down in February in construction (-12,000; -0.7%) and manufacturing (-9,200; -0.5%). On a year-over-year basis, employment was little changed in construction, while it was down by 52,000 (-2.8%) in manufacturing.

Today’s employment report is stale news as the war in Iran, which began on February 28 with coordinated strikes by the US and Israel targeting Iranian nuclear and military infrastructure, has had profound effects on the global economy. Owing to the closure of the Straits of Hormuz, oil flows are down by roughly 20 million barrels. Even with the largest release ever from strategic petroleum reserves, oil prices remain near $100 a barrel, a dramatic uptick from just two weeks ago.

Ordinarily, such economic weakness would trigger central bank easing, but the surge in energy prices will add to inflation, at least temporarily. Labour markets remain soft as the economy bears the weight of US tariffs and an upcoming CUSMA review looms over business. This is likely to complicate the Bank of Canada’s future monetary policy path. While the Bank might otherwise consider a rate cut to return growth and labour markets to healthier levels, the surge in oil prices is inflationary.

The Bank of Canada’s sole mandate is to return inflation to its 2% target, while the Fed’s mandate is to control inflation while maximizing noninflationary growth. The energy shock, if persistent, could justify a rate hike.

The BoC meets again next Wednesday, March 18, and markets and economists expect officials to hold the policy rate steady at 2.25%. The February CPI report for Canada will be released on Monday, but the February data are now ancient history, given the war. Meanwhile, hourly wages for full-time permanent employees rose 4.2% from a year ago, compared with 3.3% in January. Economists surveyed were expecting a 3.2% increase.

Much depends upon how long the war will last. According to today’s Wall St. Journal, oil markets are “waking up to a new reality: Disruption to the Gulf’s prodigious energy supplies isn’t ending anytime soon.” Many analysts aver that crude could hit new multiyear highs if the conflict drags on.

“Goldman Sachs this week raised its oil price forecasts, citing longer-than-expected disruption. Brent crude could average $145 in March and April in a more extreme scenario, it said. The bank now expects disruption to flows through the strait to last 21 days, up from its previous forecast of 10 days. Macquarie Group is now predicting that crude prices could top $150 if the strait remains closed for a few weeks. Others say oil prices could go even higher.”

“One reason for the changing outlook is a surge in attacks on tankers near the strait. Over the past 24 hours, at least seven vessels were hit in waters off the coast of Dubai and Iraq. One of the ships, a foreign tanker carrying Iraqi fuel oil, was ablaze in Iraqi waters. US officials said that Iran has also started to litter the strait with sea mines that could give the country outsized power to wreak havoc with the global economy.

“The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” the International Energy Agency said Thursday as it slashed its forecast for oil-supply growth this year.

The year-over-year acceleration in the all-items CPI was driven by the temporary Goods and Services Tax (GST)/Harmonized Sales Tax (HST) break that began on December 14, 2024. This resulted in monthly declines for the exempt goods and services, which have now fallen out of the year-over-year movement, putting upward pressure on headline CPI growth.

The headline CPI accelerated, but the year-over-year decline in gasoline prices in December moderated it. Excluding gasoline, the CPI rose 3.0% in December, following a 2.6% increase in November.

The CPI fell 0.2% month over month in December. On a seasonally adjusted monthly basis, the CPI increased 0.3%.

Various indexes were affected by the GST/HST exemption in December 2024, including restaurant food, alcoholic beverages, toys, games and hobby supplies, children’s clothing and some grocery items, such as potato chips and confectionery.

Year over year, higher restaurant prices were the largest contributor to faster all-items CPI growth in December 2025. Prices for food purchased from restaurants rose 8.5% in December, up from 3.3% in November. Prices for alcoholic beverages served in licensed establishments (+6.5%) and purchased from stores (+5.6%) also rose faster in December.

Prices for toys, games (excluding video games) and hobby supplies rose 7.5% in December, after a 0.5% decline in November. Additionally, prices for children’s clothing accelerated in December (+4.8%) compared with November (+2.4%).

Year-over-year price growth also picked up for potato chips and other snack products (+7.9%) and confectionery (+14.2%).

Despite being unchanged month over month, prices for food purchased from stores rose 5.0% year over year in December. Coffee (+30.8%) and fresh or frozen beef (+16.8%) remained the largest contributors to the increase.

This report confirms the Bank’s hold on the policy rate. Aside from food prices, inflation seems to be dissipating. The overall economy is in better-than-expected shape, as upward revisions to GDP since 2022 have been largely driven by stronger-than-expected productivity growth, a long-standing concern for the Canadian economy.

The backdrop of stronger growth and lower inflation will keep the Bank of Canada on hold for most of 2026, as the next rate move is likely to be a hike, but not until 2027 unless the US withdraws from CUSMA. In the meantime, the biggest loser in the past year has been the housing market.

The most recent Canadian Real Estate Association data suggests particularly weak activity in Ontario, the region hardest hit by the tariff uncertainty. A cautious Bank of Canada will monitor the effect of rapidly rising food prices on inflation expectations. With any luck at all, core inflation will continue to decelerate, keeping the Bank on the sidelines for much of this year.

Hopefully, greater clarity on the Canada-Mexico-US agreement will be forthcoming. Reduced uncertainty is the key ingredient required for a rebound in housing activity, particularly in the regions of Ontario and Quebec hardest hit by the tariffs.

The number of home sales recorded over Canadian MLS® Systems declined 2.7% m/m in December. On an annual basis, transactions totalled 470,314 units last year, a 1.9% decrease from 2024, despite a series of Bank of Canada rate cuts.

“There doesn’t appear to have been much rhyme or reason to the month-over-month decline in home sales in December, which was simply the result of coincident but seemingly unrelated slowdowns in Vancouver, Calgary, Edmonton, and Montreal,” said Shaun Cathcart, CREA’s Senior Economist. “For that reason, it would be prudent for market observers to resist the temptation to trace a line from the end of 2025 into 2026. Rather, we continue to expect sales to move higher again as we get closer to the spring, rejoining the upward trend that was observed throughout the spring, summer, and early fall of 2025.”

New supply declined by 2% on a month-over-month basis in December, marking a fourth straight monthly drop. Combined with a slightly larger decrease in sales activity in December, the sales-to-new-listings ratio eased to 52.3% from 52.7% in November. This remains close to the long-term average national sales-to-new listings ratio of 54.9%. Readings roughly between 45% and 65% are generally consistent with balanced housing market conditions.

There were 133,495 properties listed for sale on all Canadian MLS® Systems at the end of December 2025, up 7.4% from a year earlier but 9.9% below the long-term average for that time of year. Inventories have been falling since May 2025 owing to the mid-year rally in demand, meaning active listings could be back posting year-over-year declines around the time this year’s spring market gets going.

“While we remain in the quiet time of year for a little while longer, the spring market is now just around the corner, and it is expected to benefit from four years of pent-up demand, and interest rates that at this point are about as good as they are going to get,” said Valérie Paquin, CREA Chair. “Barring any further major uncertainty-causing events, that means we should see a more active market this year.”

There were 4.5 months of inventory on a national basis at the end of December 2025, up slightly from 4.4 months, which had been the measure since August. The long-term average for this measure of market balance is 5 months of inventory. Based on the measure of one standard deviation above and below that long -term average, a seller’s market would be below 3.6 months, and a buyer’s market would be above 6.4 months.

The National Composite MLS ® Home Price Index (HPI) fell by 0.3% between November and December 2025. It was similar to the dip recorded in November and could reflect some sellers making price concessions to sell properties before the end of the year. Most of the overall price softening in December came from markets in Ontario’s Greater Golden Horseshoe region, which was hit hard by US tariffs.

The non-seasonally adjusted National Composite MLS® HPI was down 4% from December 2024. Under the surface, year-over-year declines are larger for condo apartments and townhomes, and smaller for one- and two-storey detached homes.

Today’s data end a year that saw house prices drift lower despite falling interest rates, as a simmering trade war with Canada’s largest trading partner caused higher unemployment and considerable job uncertainty. Though US tariffs apply to a limited volume of Canadian goods, and the economy didn’t tip into a recession, the unpredictability of President Donald Trump’s trade policy has stoked a sense of economic insecurity.

In some regions, the price decline has now wiped out a sizable proportion of the gains homeowners saw during the torrid Covid market from 2020 to 2022, when overnight interest rates were reduced to a record-low 25 basis points. Back then, ultralow interest rates caused home prices to surge, particularly in smaller cities to which remote workers fled to take advantage of a lower cost of living.

Vancouver and Toronto remain by far the most expensive large cities. The benchmark price in Greater Vancouver was C$1.14 million in December. In the Toronto region, it was C$962,300 – down about 6% from a year earlier.

With many regional markets soft, sellers are now pulling back. New listings dropped 2% in December from the previous month, the fourth straight monthly decline. But the total number of homes on the market last month was still 7.4% higher than the previous year. That’s the equivalent of about 4.5 months of inventory.

We concur with the view that there is considerable pent-up demand among potential first-time buyers who will likely dip their toe in the market once winter passes. This year, we also see a record volume of refinances and renewals, which will increase monthly mortgage payments and dampen household purchasing power.

The jobless rate rose 0.3 percentage points to 6.8%, as more people searched for work. The increase in the unemployment rate in December partially offsets a cumulative decline of 0.6 percentage points in the previous two months. Employment rose among people aged 55 and older, while it fell among youth aged 15 to 24.

Full-time employment rose by 50,000 (+0.3%) in December, while part-time employment fell by 42,000 (-1.1%). The decline in part-time work in the month partially offsets a cumulative gain of 148,000 (+3.9%) in October and November. Over the 12 months to December 2025, part-time employment rose at a faster pace (+2.6%; +99,000) than full-time employment (+0.7%; +128,000).

In December, there was little change in the number of private- and public-sector employees, as well as in the number of self-employed workers.

There were 1.6 million people unemployed in December, an increase of 73,000 (+4.9%) from November.

The participation rate—the proportion of the population aged 15 and older who were employed or looking for work—rose by 0.3 percentage points to 65.4%. On a year-over-year basis, the labour force participation rate was unchanged in December. The unemployment rate for youth aged 15 to 24 rose 0.5 percentage points to 13.3% in December, as fewer youth were employed (-27,000; -1.0%). Labour market conditions had previously improved for youth in October and November, with employment rising by 70,000 (2.6%) and the youth unemployment rate falling by 1.9 percentage points over this period.

In 2025, Trump’s tariff policy and negative attitude towards Canada have caused considerable uncertainty, having a marked deleterious effect on the Canadian economic outlook, particularly in sectors dependent on US demand. Job vacancies also fell during 2025.

The Bank of Canada has reiterated that its primary mandate is price stability, effectively leaving the task of closing the output gap to fiscal authorities. By early next year, it will likely become evident that fiscal support delivered through large capital projects is rolling out too slowly to offset near-term weakness in activity materially. If layoffs persist at their recent pace and the United States were to withdraw from the Canada‑US‑Mexico Agreement, the case for an additional round of monetary easing would strengthen.

Absent that downside scenario, the more plausible path is a slow and limited normalization of policy. Market pricing currently anticipates that the next move by the Bank of Canada will be to raise the overnight policy rate, but that is not likely until at least late this year.