The cooling that began in early spring has hardened into a genuine correction. May finds the Canadian housing market in full retreat from its winter peak, with prices declining meaningfully across the regions that ran hottest and buyers firmly on the sidelines. A second, larger rate increase from the Bank of Canada has reinforced the message that borrowing costs will keep rising, and the market is adjusting accordingly. The euphoria of February feels like a distant memory.
Bank of Canada (policy rate) and Statistics Canada (inflation).
Prices decline in earnest
This is no longer a matter of prices merely easing off the peak. Benchmark values in the GTA, its surrounding commuter towns, and the pandemic boomtowns of Ontario have fallen measurably from their February highs, with the steepest declines concentrated in detached and other ground-oriented homes. The very properties that appreciated most violently on the way up are giving back gains fastest on the way down. The correction is real, and it is accelerating.
Bank of Canada policy rate, 2022
Overnight target rate at each 2022 decision. Source: Bank of Canada.
The rate hikes accelerate
The Bank of Canada has followed its March move with a larger increase, and the market now anticipates the overnight rate climbing steadily through the summer and into autumn. Fixed mortgage rates have risen sharply, and variable-rate borrowers are watching their costs mount with each announcement. The doubling of effective borrowing costs that seemed a forecast in March is becoming a lived reality, and it is doing exactly what monetary policy is designed to do.
Verified · 2022
Beginning March 2, 2022, the Bank of Canada raised its policy rate from 0.25% to 4.25% by year-end — the fastest tightening cycle in decades.
Buyers on the sidelines
Demand has evaporated at the margins. Many buyers who were active in the winter have either transacted or been priced out by the stress test at higher qualifying rates. Others are choosing to wait, reasoning that a falling market rewards patience. This buyer hesitancy is now the dominant force in the market. With fewer bidders competing, the pricing power that sellers enjoyed for two years has shifted decisively toward buyers who remain in the game.
Sellers adjust to a new reality
The adjustment is hardest for sellers, particularly those who purchased near the peak or set expectations based on winter comparables. Homes are taking longer to sell, price reductions are increasingly common, and the underpricing strategy that reliably sparked bidding wars no longer works. Sellers who must transact are learning to meet the market, while those with flexibility are pulling listings and waiting. Both responses reduce effective supply but confirm the shift in sentiment.
Inflation (CPI), 2015–2022
Annual average consumer price inflation. Source: Statistics Canada.
Where the market holds up
Not every region is falling at the same rate. Calgary and much of Alberta continue to demonstrate resilience, supported by firm energy prices, strong migration, and affordability that never reached the extremes of Ontario. Montreal and the Atlantic markets are softening more gently. The through-line is that the markets with the largest pandemic run-ups are correcting hardest, while those that stayed grounded are weathering the tightening far better.
Looking ahead
We expect the correction to continue as the Bank of Canada presses on with rate increases through the summer. Prices in the most inflated markets have further to fall, and sales volumes are likely to remain subdued until borrowing costs stabilize and buyers regain confidence. For buyers with secure financing and a long horizon, a cooling market brings opportunities that were unthinkable in February. For everyone, the watchword is patience.
This analysis is built on Neighbourly.io — the real estate data API for Canada. Standardized addresses, boundaries, demographics, permits and market signals through a single interface.
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