Shaun Cathcart, CREA’s Chief Economist, said, “At the national level, July’s housing data was a carbon copy of the June numbers, with home sales edging up, listings down, and prices remaining stable. The more interesting story over the last few months has been below the surface of the headline national numbers, where markets across the country are generally moving back towards balance. That’s true on the Prairies, in Quebec, and on the East Coast, where most sellers’ markets have been steadily cooling off over the past year. More recently, it’s also been true of the markets in B.C.’s Lower Mainland and Ontario’s Greater Golden Horseshoe, where formerly buyers’ or borderline buyers’ markets have largely shifted back into balanced market territory.”

New listings declined by a further 1.6% on a month-over-month basis in July 2026, marking the third drop in a row.

Combined with the small increase in sales recorded in June, the national sales-to-new listings ratio tightened to 51.3% in July. This is converging on the long-term average for the national sales-to-new listings ratio of 54.7%. Readings roughly between 45% and 65% are generally consistent with balanced housing market conditions.

“The ongoing shift towards a more normal balance between supply and demand in so many markets across Canada is good news for buyers, whether that means not having to worry about your new home falling in value, or not feeling pressured to make a decision due to competing offers,” said Garry Bhaura, CREA Chair. “No matter where you are in Canada, more moderate housing market conditions can be expected to continue to bring buyers off the sidelines going forward.”

There were 205,388 properties listed for sale on all Canadian MLS® Systems at the end of July 2026, up just 0.6% from a year earlier and just 1.5% above the long-term average for that time of the year. Overall supply has been sliding sideways and is very close to average levels for over a year now.

There were 4.7 months of inventory nationally at the end of July 2026, the lowest level so far in 2026 and slightly below the long-term average of 5 months. 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.

With the exception of Saskatchewan, New Brunswick, and Newfoundland and Labrador, which are still borderline sellers’ markets, other provinces have seen their months of inventory converge toward long-term averages in recent months. Notably, even Ontario’s months of inventory measure was only about half a standard deviation above average in July, after being in a buyers’ market for the first four months of this year.

The National Composite MLS® HPI edged up 0.1% from June to July, marking the first increase in the national measure since November 2024.

The non-seasonally adjusted National Composite MLS® HPI was down 3.3% compared to July 2025. Year-over-year declines have been shrinking since January, with the July 2026 reading marking the smallest decrease since October 2025.

The brief opening of the Strait of Hormuz triggered a sharp decline in oil prices and market-driven interest rates. Alas, the opening was short-lived as the war resumed in spades.

Despite an ongoing trade war with the US, Canada’s largest trading partner, the country’s economy appears to be picking up. The unemployment rate fell to a two-year low last month, and the latest reading on gross domestic product suggests annualized growth rebounded to 3.4% in the second quarter, higher than the central bank’s previous estimate.

While the inflation data for July ticked up a bit, the rise in gasoline prices has not spurred a generalized rise in price pressures. We believe the Bank of Canada will remain on the sidelines once again at its September 2 meeting.

South of the border, however, US long-term Treasury yields have been boosted by the crowding-out effect of the huge corporate bond financing of the AI hyperscalers.

Monday saw the yield on the 30-year US Treasury bond top 5.3% for the first time since the eve of the Global Financial Crisis in 2007, and that’s in line with global experience; Japanese 30-year yields have risen above 4% for the first time in their 27-year history, while equivalent UK gilts yield their highest since 1998. Rising long-term yields have pushed up mortgage rates in the UK, Europe and Japan.

To be sure, some of the upward rate pressure reflects inflation expectations, but three other factors are also at play: the budget deficit outlook; AI-related corporate bond issuance; and the changing Treasury buyer base. With companies issuing huge amounts of debt to fund AI capex, long Treasuries have a new competitor that might force them to offer a stronger yield, while the growing budget deficit never goes away as an issue.

While Canada’s fiscal situation is nowhere near as dire as the American fiscal imbalance, Canada cannot fully sidestep upward pressure on market-driven rates.

Canada’s annual inflation rate rose to 3.2% in May, Statistics Canada reported Monday, marking its highest level since December 2023. The increase exceeded economists’ expectations, with Bloomberg’s survey consensus forecasting a 3.0% gain, up from 2.8% in April. On a monthly basis, consumer prices climbed 1.0%, also coming in above forecasts.

Despite the headline surprise, measures of underlying inflation suggest price pressures remain relatively contained as the economy continues to adjust to slower population growth and the adverse effects of U.S. trade policies on exports.

Excluding food and energy, inflation accelerated to 1.6% year-over-year, while the consumer price index excluding gasoline increased 2.2%. The average of the Bank of Canada’s preferred core inflation measures—the trim and median indexes—held steady at 2.1%. However, on a three-month annualized basis, both gauges picked up sharply to 2.3%, indicating some recent firming in underlying inflation trends.

Financial markets initially interpreted the report as supportive of tighter monetary policy. The Canadian dollar strengthened briefly before reversing course, trading at US$0.7062 per Canadian dollar. Meanwhile, the two-year Government of Canada bond yield rose roughly two basis points to 2.79%. Overnight index swaps continue to price in nearly one quarter-point Bank of Canada rate increase by year-end.

The conflict in the Middle East continued to drive higher energy costs in May, with gasoline prices rising 33% from a year earlier, according to Statistics Canada. Air transportation prices also surged, increasing 7.4% after falling 1.7% in April. Airlines are experiencing higher operational costs, notably for jet fuel.

Since then, easing tensions between the United States and Iran has helped push oil prices lower, with Canadian gasoline prices retreating to their lowest levels since mid-March. If sustained, the decline should provide some relief to consumers and help moderate headline inflation in the months ahead. Earlier this month, Bank of Canada Governor Tiff Macklem said he expects inflation to remain near 3% in the near term before gradually returning to the central bank’s 2% target.

Gasoline prices increased 33.2% year-over-year in May, accelerating from a 28.6% gain in April. The escalation was largely driven by supply concerns linked to the conflict in the Middle East, particularly disruptions associated with the closure of the Strait of Hormuz. These uncertainties pushed gasoline prices higher for a third consecutive month. As a result, Canadians paid the highest prices at the pump since June 2022, when Russia’s invasion of Ukraine triggered similar supply fears and a sharp increase in global energy costs.

Four of the eight major components accelerate in May

On a month-over-month basis, prices for fresh vegetables rose 5.5% in May following a decline of 3.9% in April. This is the largest monthly increase in May since 2008 and is attributed to reduced supply and higher fuel costs.

Collectively, higher prices for fresh fruit and fresh vegetables contributed to an acceleration in inflation for food purchased from stores, rising 4.3% year over year in May, the 16th consecutive month it has outpaced headline inflation on a year-over-year basis. Food prices will continue to rise, reflecting a 40% increase in nitrogen fertilizer prices during the planting season.

Shelter inflation continued to moderate in May, with prices rising 1.7% year-over-year, down slightly from 1.8% in April. The homeowners’ replacement cost index fell 2.5%, marking its 13th consecutive decline. Other owned accommodation expenses, including real estate commissions, decreased 2.1% following a 2.7% drop in April. Meanwhile, mortgage interest costs edged lower, declining 0.2% year-over-year compared with a 0.1% decline in April, extending a 33-month trend of slowing mortgage cost inflation.

Rent inflation also eased modestly, rising 3.5% from a year earlier versus 3.6% in April, the slowest pace of rent growth since January 2022.

Price growth for durable goods was unchanged at 1.9% year-over-year in both April and May. A notable source of upward pressure came from computer equipment, software, and supplies, where prices rose 3.9% after declining 0.2% in April. Higher costs for key components such as random-access memory (RAM) and solid-state drives (SSDs), driven by strong demand from artificial intelligence data centres and limited production capacity, contributed to the increase.

Offsetting some of these gains, price growth slowed across several other durable goods categories. Increases were more modest for tools and household equipment (+1.1%) and passenger vehicles (+2.5%), while prices for household appliances fell 5.7% year-over-year, a steeper decline than previously recorded.

Bottom Line

Today’s inflation report reinforces our view that higher gasoline prices will temporarily boost headline inflation while further eroding household purchasing power. However, these energy-driven increases, largely tied to geopolitical tensions, are unlikely to trigger a broader surge in underlying inflation. While food and transportation continue to account for a disproportionate share of price growth, inflationary pressures across the economy are generally moderating amid a softer labour market and slowing domestic demand.

May data support our base-case scenario that the Bank of Canada will remain on hold through the remainder of 2026. Policymakers will continue to closely monitor incoming inflation data and stand ready to tighten policy if price pressures broaden and become more persistent, but for now, underlying inflation trends remain consistent with a patient, wait-and-see approach.

Higher energy prices, particularly gasoline, drove the acceleration. In April, energy prices rose 19.2%, following a 3.9% gain in March. Gasoline prices continued to rise year over year in April, increasing sharply by 28.6% after a 5.9% gain a month earlier.

The removal of the consumer carbon levy on April 1, 2025, led to a monthly price decline that month, putting upward pressure on year-over-year gasoline price movement in April 2026. In addition to the accelerating base-year effect, prices were pushed higher by supply uncertainty (caused by the conflict in the Middle East) and by the switch to the more expensive summer blend. The temporary suspension of the federal fuel excise tax, which took effect on April 20, moderated the increase.

Similarly, prices for fuel oil and other fuels increased 41.3% year over year in April, amid higher oil prices linked to the conflict in the Middle East.

A smaller year-over-year decline in natural gas prices in April (-2.4%) compared with March (-18.1%) also exerted upward pressure on energy prices. Natural gas prices were impacted by the removal of the consumer carbon levy in April 2025.

Moderating faster price growth in the all-items CPI was a year-over-year decline in prices for travel tours and a slowdown in rent prices.

The CPI was up 0.4% month-over-month in April. On a seasonally adjusted monthly basis, the CPI increased 0.3%.

The CPI Trimmed-mean in Canada, which is a measure of core inflation, decreased to 2.0% in April 2026 from 2.2% in the previous month, missing market expectations of 2.1%. CPI Trimmed-Mean in Canada averaged 2.10 Percent from 1990 until 2026, reaching an all-time high of 5.70% in June of 2022 and a record low of 0.80% in November of 1997.

The CPI-Median in Canada, which is a measure of core inflation, decreased to 2.1% in April 2026 from 2.3% in the previous month, missing market expectations of 2.2%. CPI Median in Canada averaged 2.15 Percent from 1990 until 2026, reaching an all-time high of 5.40% in October of 2022 and a record low of 0.90% in November of 1997.

Bottom Line

Today’s report is consistent with our view that higher gasoline prices will lift headline inflation and reduce household purchasing power. Still, these war-related pressures are unlikely to reignite systemic inflation pressures. While some categories, especially food and shelter, continue to contribute disproportionately to inflation, broader price pressures are easing alongside soft labour market conditions.

The longer the Strait of Hormuz remains closed, the longer energy prices will remain elevated; overall, the April data support our base case that the Bank of Canada will remain on the sidelines for the rest of 2026. The Bank will continue to monitor price data carefully, promising rate hikes if inflation ticks up and appears entrenched.

The result marked a second straight month of limited movement after February’s sharp 84,000-job decline. Full-time employment fell by 47,000, while part-time positions increased by 29,000. Employment levels were broadly unchanged across the private and public sectors and among self-employed workers.

Employment varied little across major age groups in April. The unemployment rate rose among youth aged 15 to 24 to 14.3% and among core-aged men to 6.1%. Regionally, employment declined in Quebec, Newfoundland and Labrador, Saskatchewan, and New Brunswick, while Ontario added 42,000 jobs. Meanwhile, the employment rate slipped 0.1 percentage points to 60.5%.

Average hourly wages among employees were up 4.5% (+$1.64 to $37.77) on a year-over-year basis in April, following growth of 4.7% in March (not seasonally adjusted).

The proportion of unemployed people who had been continuously searching for work for 27 weeks or more—considered long-term unemployment—was 22.5% in April. This proportion was little changed both in the month and compared with 12 months earlier. However, it remained significantly above the pre-COVID-19 pandemic average of 17.1% observed from 2017 to 2019.

At the same time, the monthly layoff rate (0.6%) in April remained in line with the pre-pandemic average, showing no recent elevation (not seasonally adjusted).

On a year-over-year basis, the overall labour force participation rate was down 0.3 percentage points in April. This largely reflected population aging, which has put downward pressure on the labour supply as more individuals have entered retirement. Among core-aged people, the labour force participation rate was up 0.3 percentage points year over year, while for youth aged 15 to 24, it was little changed.

On a month-over-month basis, employment decreases in April were concentrated in information, culture and recreation (-25,000; -2.8%), construction (-16,000; -1.0%), and in ‘other services’ (-13,000; -1.6%), an industry which includes repair and maintenance as well as personal services.

Employment change by industry, April 2026

On a year-over-year basis, employment was little changed across most industries in April, with the notable exception of health care and social assistance, which was up 119,000 (+4.1%) over the period.

The cumulative decline in employment since January comes as US tariffs continue to loom over businesses and the war in Iran heightens global uncertainty, two forces expected to shape the Canadian economy this year. With the 50% rise in oil prices, demand destruction is already well underway.

Another important fundamental in the labour market is the rapid development of AI, which is already causing enormous layoffs, especially in the U.S. See the chart below.

In other news, the US employment report was also released this morning, showing the strongest two-month gain since 2024.

US employers added more jobs than expected for a second month, and the unemployment rate held steady in April, indicating the labour market is holding up despite rising energy costs sparked by the war in Iran.

Nonfarm payrolls rose 115,000 last month after an even bigger surge in March, marking the strongest two-month increase since 2024, according to Bureau of Labour Statistics data out Friday. The unemployment rate was unchanged at 4.3%. The report showcases a labour market that may be gaining momentum after near-zero job growth last year. It showed hiring advanced across a variety of sectors, and follows other data indicating layoff activity remains low.

The relative weakness of the Canadian labour market will discourage the Bank of Canada from tightening monetary policy too soon. To be sure, inflation remains a risk as higher energy costs become embedded in the price of a wide array of goods and services. The Bank will be reluctant to respond with rate hikes over the next few announcement dates.

Trade negotiations will accelerate in the coming months as the future of CUSMA is determined. It is hard to imagine the Bank of Canada tightening in the face of such a weak housing market.

“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.