TD Bank has dramatically reduced its housing market forecast for 2026, signalling deepening concerns about Canada's residential real estate sector as affordability challenges continue to plague prospective homebuyers across the country.
The Toronto-based financial giant announced Thursday it expects national home prices to decline by 8.5 per cent this year, a significant revision from its previous forecast of a 2.1 per cent increase issued just three months ago. The bank cited mounting economic pressures, including elevated interest rates and deteriorating consumer confidence, as key factors driving the reassessment.
"The housing market correction is proving more persistent and severe than initially anticipated," said TD Senior Economist Sarah Mitchell during a briefing with reporters. "We're seeing fundamental shifts in buyer behaviour and market dynamics that suggest a prolonged adjustment period ahead."
The revised outlook affects markets nationwide, with Calgary expected to experience a 6.2 per cent decline in average home prices, according to TD's analysis. The forecast reflects broader challenges facing Alberta's housing sector, where high interest rates have significantly reduced purchasing power for first-time buyers and existing homeowners looking to upgrade.
Industry experts note that Calgary's real estate market, while previously more resilient than Toronto or Vancouver, has shown increasing vulnerability to national economic trends. Local real estate professionals using platforms like CalgaryFinder.com report a noticeable slowdown in listing activity and extended days on market for properties across various price ranges.
The bank's forecast revision comes as Statistics Canada reported a 12.3 per cent year-over-year decline in housing starts for February, with particular weakness in multi-unit construction projects. Building permits have also fallen sharply, suggesting continued softness in new supply additions throughout 2026.
TD economists warn that persistent affordability challenges could extend the market correction well into 2027. The bank estimates that mortgage payments now consume approximately 67 per cent of median household income in major Canadian centres, well above the historical average of 45 per cent.
Federal policymakers face mounting pressure to address housing affordability through targeted interventions, though economists remain divided on the effectiveness of demand-side measures versus supply-focused initiatives. The Bank of Canada has maintained its key interest rate at 4.75 per cent, citing ongoing inflationary pressures despite weakening economic growth.
Regional variations remain significant, with Atlantic provinces showing relative stability compared to major urban centres in Ontario and British Columbia. However, TD warns that interconnected economic factors could broaden the market correction beyond currently affected regions.
The housing sector's struggles have broader implications for Canadian economic growth, as residential investment typically accounts for approximately 7.5 per cent of gross domestic product. Construction employment has already begun declining in several provinces, raising concerns about spillover effects into related industries.
Market participants are closely monitoring upcoming federal budget measures and potential Bank of Canada policy adjustments that could influence housing market trajectory throughout the remainder of 2026. TD's forecast suggests any meaningful recovery may not materialize until late 2027 at the earliest, contingent on sustained improvements in affordability metrics.