Housing Activity Fell Again in January–Depressed by Record Winter Storm 

Today’s release of January housing data by the Canadian Real Estate Association (CREA) showed the housing market frozen solid by the record winter storms. Both home sales and prices continued their downward trend, but have yet to attract the beleaguered first-time homebuyer.

The number of home sales recorded over Canadian MLS® Systems fell 5.8% on a month-over-month basis in January 2026.

“The monthly decline in national home sales was driven primarily by less activity in the Greater Golden Horseshoe and Southwestern Ontario, suggesting that the story was probably more about a historic winter storm than a downshift in demand,” said Shaun Cathcart, CREA’s Senior Economist. “Notwithstanding the chilly start to the year, we continue to expect 2026 will ultimately be defined by pent-up demand from first-time buyers finally seeing a chance to enter the market.”

New Listings

Similar to what happened in January 2025, new supply increased month over month in January 2026, rising 7.3% as sellers appeared eager to start the year.

The burst of new supply was driven by about two-thirds of local markets, and led by Montreal, Quebec City, Calgary, Greater Vancouver, and Victoria. Meanwhile, Central and Southwestern Ontario were far less prominent and, in many cases, recorded declines. This reinforces the view that winter weather was a primary factor in January in those regions, as it appears to have suppressed both demand and supply.

With a rare combination of a sizeable increase in new listings and a sharp slowdown in sales in January, the national sales-to-new listings ratio dropped to 45% compared to 51.3% at the end of 2025. The long-term average for the national sales-to-new-listings ratio is 54.8%, with readings generally between 45% and 65%, consistent with balanced housing market conditions.

There were 140,680 properties listed for sale on all Canadian MLS® Systems at the end of January 2026, up 4.5% from a year earlier but 11.4% below the long-term average for that time of year.

There were 4.9 months of inventory nationally at the end of January 2026, up from 4.6 months at the end of December. The long-term average for this measure of market balance is five months of inventory. 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.

In line with more supply and less demand in January 2026, the National Composite MLS® Home Price Index (HPI) fell by 0.9% on a month-over-month basis.

The non-seasonally adjusted National Composite MLS® HPI was down 4.9% compared to January 2025.

Regionally, prices remain down year over year in British Columbia, Alberta, and Ontario, offsetting gains in other provinces. An analysis by city shows the largest year-over-year declines dip into double digits in Hamilton-Burlington and Oakville-Milton, contrasted with double-digit gains in Sudbury, Quebec City, and St. John’s, Newfoundland.

Home Prices

Regionally, prices remain down year over year in British Columbia, Alberta, and Ontario, offsetting gains in other provinces. An analysis by city shows the largest year-over-year declines dip into double digits in Hamilton-Burlington and Oakville-Milton, contrasted with double-digit gains in Sudbury, Quebec City, and St. John’s, Newfoundland.

Bottom Line

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. Although U.S. tariffs affect only a limited volume of Canadian goods, and the economy hasn’t tipped into a recession, the unpredictability of President Donald Trump’s trade policy has stoked economic insecurity.

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

There is considerable pent-up demand among potential first-time buyers who will likely dip their toes in the market once winter passes. This year, we also see a record volume of refis and renewals, which will increase monthly mortgage payments and dampen household purchasing power. Affordability remains a challenge for first-time buyers, but mortgage rates and prices are considerably below year-ago levels. A reawakening of housing activity is likely as the spring market approaches.

With inflation well-behaved, the Bank of Canada has the flexibility to cut the overnight rate further if the economy falters.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

CPI Inflation in Canada Fell A Tick to 2.3% Y/Y in January on Gasoline Price Decline

The Consumer Price Index (CPI) rose 2.3% on a year-over-year basis in January, following a 2.4% increase in December.

The gasoline price index was the largest contributor to the deceleration in headline inflation, with a larger decline in January than in December. Excluding gasoline, the CPI rose 3.0% in January, matching the December increase.

Indexes with year-over-year movements impacted by the temporary GST/HST break in January 2025 continued to put upward pressure on the year-over-year all-items increase in January 2026. Among the affected indexes, the CPI remained most affected by the acceleration in prices for restaurant meals, and to a lesser extent, by prices for alcoholic beverages, toys, and children’s clothing.

The core inflation measures decelerated further in January, with the BoC’s two favourite measures easing to their lowest levels in a year (see chart below).

Prices at the pump fell 16.7% year over year in January, after a 13.8% drop in December. The larger year-over-year decline was mainly due to a base-year effect. The index rose 0.5% month over month in January 2026, compared with a 4.0% increase in January 2025, when crude oil prices rose. Additionally, the partial reintroduction of the provincial gas tax in Manitoba in January 2025 is no longer impacting the 12-month movement.

For food purchased from restaurants, prices were higher in January 2026 (+12.3%) than in January 2025, when prices were lower due to the GST/HST break.

Similarly, prices rose on a year-over-year basis for other previously tax-exempt goods in January 2026, including alcoholic beverages purchased from stores (+7.9%), alcoholic beverages served in licensed establishments (+9.0%), toys, games (excluding video games) and hobby supplies (+8.7%) and children’s clothing (+6.3%).

Year over year, prices for cellular services decelerated in January (+4.9%) compared with December (+14.6%), reflecting a base-year effect after six consecutive months of upward pressure. On a month-over-month basis, prices declined in January 2026 (-0.8%) after increasing in January 2025 (+8.3%).

Prices for food purchased from stores rose 4.8% year over year in January, following a 5.0% increase in December. The slower price growth was mainly driven by a decline in fresh fruit prices (-3.1%) in January, after a 4.5% increase in December. Amid generally strong or stable harvests in producer regions, the largest contributors to downward pressure on prices were berries, oranges and melons.

Since early 2024, growth in shelter costs has slowed year over year. In January 2026, prices continued to decelerate, rising 1.7%. This is the first time in nearly five years that year-over-year shelter price growth has fallen below 2.0%. Slower growth in rents and mortgage interest costs drove the deceleration.

Rent prices rose at a slower pace year over year in January (+4.3%) than in December (+4.9%). Rent prices decelerated the most in Prince Edward Island (+0.2%) and Saskatchewan (+1.8%).

The mortgage interest cost index rose 1.2% year over year in January, following a 1.7% increase in December. This index has been decelerating since September 2023.

In January, prices rose at a slower pace in nine provinces than in December. Year-over-year price growth accelerated in British Columbia due to a base-year effect, as hotel prices declined on a monthly basis in January 2025 after increasing in December 2024, coinciding with a series of high-profile concerts in Vancouver.

Bottom Line

Although inflation pressures are dissipating, this report alone will not trigger a Bank of Canada rate cut when the Bank meets again on March 18. It is unlikely to move the Bank of Canada from the sidelines as it continues to evaluate how US tariffs are affecting the economy. The data suggest that Americans are paying the bulk of the tariffs.

The Bank of Canada’s preferred measures of core inflation decelerated, with the median gauge edging down to 2.5% from 2.6%, and trim falling to 2.4% from 2.7%.

What the Canadian economy needs is greater clarity on the future of the Canada-Mexico-United States (CUSMA) trade agreement. 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 central bank kept its policy rate at 2.25% last month for the second consecutive meeting and has signalled an aversion to juicing demand at this time. In a speech earlier this month, Governor Tiff Macklem warned that cutting interest rates amid a supply-side shock could stoke inflation.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

Canadian Jobs Growth Slowed Markedly in January as the Unemployment Rate Fell Sharply to 6.5%

Today’s Canadian Labour Force Survey for January was weaker than expected. Employment declined by 24,800 (-0.1%), and the employment rate decreased 0.1 percentage points to 60.8%. This followed only a small gain in December and was the first decline in the employment rate since August 2025.

In January, a decrease in part-time employment (-70,000; -1.8%) was partly offset by a gain in full-time work (+45,000; +0.3%). Compared with 12 months earlier, overall employment was up by 134,000 (+0.6%), driven by gains in full-time work (+149,000; +0.9%).

The number of private sector employees fell by 52,000 (-0.4%) in January, partly offsetting a net increase of 128,000 (+0.9%) in the last three months of 2025. There was little change in the number of public sector employees (+13,000; +0.3%) and self-employed workers (+14,000; +0.5%) in January.

The jobless rate fell by 0,3 percentage points to 6.5% in January, driven by a decline in the number of people searching for work. The unemployment rate in January was the lowest since September 2024, down 0.6 percentage points from the recent high of 7.1% recorded in August and September 2025.

The labour force participation rate—the proportion of the population aged 15 and older who were employed or looking for work—decreased 0.4 percentage points to 65.0% in January, following an increase of 0.2 percentage points in December. The decline in January was concentrated in Ontario, the hub of the auto sector, manufacturing generally, and steel production. Recent data also show that the number of entry-level positions has fallen sharply, likely due to artificial intelligence replacing these positions.

The unemployment rate fell across most major demographic groups in January, largely reflecting declines in the number of job searchers.

Unemployment rate by age group, January 2026

Manufacturing jobs were hard hit by the tariffs and trade uncertainty. 

The number of people working in manufacturing fell by 28,000 (-1.5%) in January, bringing employment down to levels last observed in August 2025. The decline in January was concentrated in Ontario. On a year-over-year basis, overall employment in manufacturing was down 51,000 (-2.7%).

Employment change by industry, January 2026

There were also fewer workers in educational services (-24,000; -1.5%) and public administration (-10,000; -0.8%) in January. Employment in both industries was little changed year over year.

On the other hand, employment increased in information, culture and recreation (+17,000; +2.0%) in January, continuing an upward trend that began in September 2025. On a year-over-year basis, employment in this industry was up 30,000 (+3.6%) in January.

Employment also rose in business, building and other support services (+14,000; +2.1%) in January, the first increase since October 2024. Employment in this industry had previously followed a downward trend through most of 2025. Compared with 12 months earlier, employment in business, building and other support services was down 38,000 (-5.3%) in January.

Bottom Line

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. Fiscal support delivered through large capital-spending projects will be implemented too slowly to materially offset near-term weakness in activity. 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 markedly.

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 this is unlikely until 2027. If labour force weakness and higher mortgage costs associated with this year’s huge volume of mortgage renewals, in combination with AI-induced job losses, weaken the economy, the Bank of Canada might be willing to cut the overnight policy rate later this year. Uncertainty has already markedly weakened the housing market, despite the reduction in home prices and mortgage rates over the past year.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

I just returned from a mortgage conference with some of the best in the industry, and while most people were talking about whether we’d see another rate reduction by the Bank of Canada or stay the course (including me), we had experts share a “thought experiment” that could change the game for an entire generation: The 50-year amortization.

I know what you’re thinking: “That’s way too much interest!” But let’s look at the reality of the Canadian market in 2026.

The Barrier to Entry is a Wall The average first-time homebuyer is now 40 years old. In our major cities, nearly 7 out of 10 buyers require a “gift” from their parents to even qualify—often to the tune of $100k to $300k. homeownership is becoming a “members only” club for those with generational wealth.

Rent is 100% Interest The biggest objection to a 50-year mortgage is the interest cost over time. But we rarely apply that same logic to the rental market. If you rent for 50 years, you have paid 100% interest and own 0% of the asset.

A 50-year mortgage isn’t a life sentence; it’s an on-ramp. It provides the lowest possible monthly payment during the years when life is most expensive—when you’re starting a career or raising a young family.

The Forced Savings Advantage We are living in a “K-shaped” economy. Homeowners are statistically 6 to 7 times wealthier than renters because a mortgage is a forced savings vehicle.

• Equity as a Safety Net: Homeowners can tap into equity to consolidate high-interest debt. Renters are stuck with high-cost credit cards and no leverage.
• Tax Efficiency: The principal residence exemption remains the best tax-free wealth builder in Canada.

A New Tool for a New Reality Back in the 80s, our parents dealt with 18% interest rates, but their homes cost 3x their annual salary. Today, homes are 10x our salary. The old rules don’t work for the new reality.

A 50-year amortization would allow young professionals to get into the market at 25 instead of 45. They could make lump-sum payments as their income grows, increase their frequency, or re-amortize at renewal.

The goal isn’t to stay in debt forever—it’s to get in the door. Because you can’t build a legacy on a rental receipt.

What’s your take? Is it time we stop letting “optics” get in the way of access? I’d love to hear your thoughts.