Montreal Housing Market Drops: Canada-Wide Real Estate Correction?

Montreal’s housing market, a relative bright spot in a national slowdown, is now showing signs of cooling, with sales falling 15% in January, according to data released on February 5, 2026. The decline, reported by Quebec’s real estate board, includes a 17% drop in single-family home sales and a more pronounced 22% decrease in detached house transactions. Prices also edged down, falling 3% overall.

The shift in Montreal comes as Canada’s broader housing correction continues, impacting major urban centers. This follows similar trends observed in Vancouver, Victoria, Calgary and the Greater Toronto Area (GTA), where sales have been weakening and inventory building. The Montreal market had previously distinguished itself with comparatively robust sales and price appreciation, offering a relative bargain for prospective buyers.

The slowdown reflects a broader trend of waning confidence in the housing market. As one observer noted, a self-fulfilling prophecy is taking hold, where widespread expectations of a downturn contribute to decreased demand. Real estate, fundamentally driven by sentiment, is suffering from a “deficit of confidence.”

The GTA, in particular, is experiencing significant challenges. Resale numbers in January plummeted to 2,912 – the lowest level since the 2008 financial crisis, despite a population of nearly seven million. Average home prices have fallen below $1 million for the first time in five years. Simultaneously, new listings have surged, exceeding 10,000, creating a substantial imbalance between supply and demand and driving down prices. Single-family homes have seen a 26% price decline since their peak in 2022.

Inventory levels are rising rapidly. The average time to sell a property has extended to almost three months, with some properties remaining on the market for extended periods – in some cases, over 600 days.

The situation is mirrored in the United States, where the average age of first-time homebuyers is approaching middle age – around 40 in the US and Toronto, and 46 in Vancouver. This demographic trend highlights the increasing challenges faced by younger generations attempting to enter the housing market.

Politicians in both Canada and the United States are acutely aware of the potential consequences of a significant housing market crash. A substantial portion of the population holds real estate assets, and a decline in property values could have significant political repercussions. As one US politician stated, the goal is not to drive down housing prices, but to increase them for existing homeowners.

Canada’s housing minister echoed this sentiment, emphasizing the need for “stability” rather than price declines. The focus remains on increasing housing supply, with the expectation that new construction will moderate overall price increases, though not necessarily reduce individual property values. However, construction activity is currently sluggish, with projects being cancelled and housing starts falling short of targets. Despite a two-year supply of unsold inventory, new home prices have remained relatively stable, and significant investment is required to increase housing supply to levels seen after World War II.

The potential for a housing market downturn also raises concerns about the broader economy. Real estate represents a significant portion of Canada’s GDP, and a substantial amount of household net worth is tied to residential properties. Canadian banks hold over $2 trillion in mortgages, representing three-quarters of all consumer debt.

In the US, proposals to address the situation include 50-year mortgages, increased lender flexibility, a national building code, and pressure on the central bank to lower interest rates. In Canada, measures include allowing access to tax-sheltered funds for home purchases, providing tax credits to buyers, maintaining relatively low mortgage rates, and subsidizing construction. However, there is a notable absence of policies aimed at actively reducing housing prices; instead, the focus remains on stimulating demand.

The prevailing strategy appears to be one of maintaining stability, rather than allowing prices to fall, reflecting a broader reluctance to disrupt the housing market and the economic consequences that could follow. As one analysis concludes, this is “all you need to know” about the current state of the Canadian housing market.