It sucked.

Okay, one more holiday hound pic. The last.

Now, this was the worst year for residential real estate since the pandemic hit. In fact, nothing has been ‘normal’ since we first heard the word Covid.

In 2020 the market crashed. In 2021 it soared as rates tanked. In 2022 we hit the zenith of stupid. Prices erupted. Then rates soared. For the next two years it was a slow melt in sales, prices and confidence. And in 2025 we got Trump, tariffs and trade terror.

There hasn’t been a decent Spring rutting season market for two years, and few expect one in 2026. Prices are down overall by about a fifth. Financing costs fell in 2025, but mortgages are stiffening at 4% or above. New construction in most markets is a disaster. Condos are bleeding. Inventory is high and a ton of sellers have given up, thinking next year has got to be better.

But will it?

The odds are clearly tilting against a real estate recovery that looked possible just a few months back.

Look at new houses – canaries of consumer confidence in the economic coal mine. Despite the billions government have been throwing at this sector – trashing zoning, cutting regs, slashing fees, offering land and providing financing – it’s icing fast.

“Canadian housing starts are cooling on a trend basis,” notes TD Economics. “This is consistent with our expectation that homebuilding will ease next year, as modest population growth weighs on rents, and weak pre-sales activity feeds through to weak starts in the ownership market.”

Homebuilders confirm it. In the GTA, for example, sales have cratered for 22 consecutive months, making this the weakest year since records have been kept. Sales are running more than 80% below long-term averages. A “grim, record-breaking low,” says the industry.

“Affordability remained one of the main roadblocks for new home buyers and relief may not come anytime soon, as there is limited flexibility to alter costs.”

Exactly. Trades want more for their labour. Tariffs have jacked input costs. Land values have not receded. Interest rate cuts have fizzled. In this region it costs $1 million to bring a condo to market and $1.4 million for a house with dirt. Yet unemployment is elevated and inventory is extreme – enough new units sit in the pipeline for more than two years, the most ever.

The builders keep beating the same drum. This situation, they say, will lead to a worse one. “With the market now showing record levels of completions and an emerging decline in units under construction and pre-construction, the precursors for a future looming supply crunch are now here — a trend we expect to intensify in the years ahead.”

But that – increased demand chasing a limited supply with prices pushed higher – won’t come in 2026. Just the opposite.

Key to the next twelve months will be the cost of money. The Bank of Canada is finished cutting, just as the US Fed gets serious about easing. From a post-pandemic, inflation-fighting high of 5%, our CB has dropped its policy rate to 2.25%, and hit the snooze button. Most economists now expect rates to stay put until the summer, or perhaps the autumn. Scotiabank, National Bank and other forecasters see one or two quarter-point increases before next year is finished, as inflation ticks higher.

So home loans will be north of 4% most of the year, which impacts new buyers as well as renewers. More than 1.15 million households face mortgage refinancing in 2026, most of whom borrowed five-year loans at around 2% in the year after Covid arrived and when the Bank of Canada rate was in the ditch. Another 940,000 renew in 2027. In fact a whopping 60% of all families with mortgages face this issue over a two-year period – and higher borrowing costs will make real estate less affordable.

Finally, nobody knows what next year will bring in terms of a mercurial, unstable, emotional American president. Will he renegotiate CUSMA in good faith? Or tell us to pound salt? Is this the year he invades Greenland and southern Ontario and sends Doug Ford to an Salvadorian prison? Or has Mark Carney already got us on a path away from total dependence on a flaky America?

In any case, real estate is about confidence. Without that, buyers don’t buy. Sellers don’t sell. Builders don’t build. Prices don’t hold. There is now no valid reason to expect a renaissance when Spring comes, a hundred days hence.

But at least the Christmas dogs will be gone.

About the picture: “Greetings from Singapore,” writes CK. “Been a long time reader since 2008. I’m from Singapore, studied in Toronto in the 90s when MTV and being in bands were hip and girl magnets- not so much now. Sending you Christmas greetings and pix of our maltipoo. His name is Teddy and just got a haircut for the season. Spreading some doggy cheer with out little own ‘reindeer’ Ho Ho Ho !”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/12/26/it-sucked/