Why July's Balanced Market Has Brokers Eyeing September (2026)

The Canadian housing market found something it's been missing for months: balance. The Bank of Canada held its policy rate at 2.25% for the eighth consecutive time on July 15, inflation cooled to 2.8%, and home sales climbed to their highest level of 2026. If the numbers look like relief, the mood in the industry is more cautious. Brokers are asking not whether rates will move, but what happens when the fall listing surge hits in September?

TLDR

• The Bank of Canada held its policy rate at 2.25% on July 15, the eighth straight hold since October 2025, signaling firming growth while external risks (oil, US trade) remain the swing factor.

• Home sales totaled 43,578 units in July, up 0.5% month over month on a seasonally adjusted basis and the strongest demand reading of 2026, though still down 5.3% from July 2025.

• Canadian inflation cooled to 2.8% in June, down from 3.2% in May as gasoline price growth slowed, with core inflation steady at 2.2% excluding gas.

• Housing starts fell 5% to 229,074 units (SAAR) in July, a moderation driven by declines in Vancouver, Toronto, and Alberta as the supply pipeline remains elevated.

Bank of Canada Held at 2.25%, The Tone Turned Constructive

The Bank of Canada's July 15 decision marked the eighth consecutive hold since October 2025, but the language shifted noticeably. For months, the Bank had been cautious and measured. This time, it said the economy is "showing signs of improvement." The Bank upgraded its Q2 growth estimate to 2.5% and projected GDP expansion of 0.7% for 2026, firming to 1.8% in 2027 and 2028.

The unemployment rate lingered at 6.5% in June, hovering in a 6.5% to 7% range since the end of 2024. Consumer spending has remained solid, and exports have resumed growth. None of this suggests an urgent need to cut, but the messaging reads like a Governing Council preparing the ground for rate relief sometime in 2026 if external risks don't spike.

Those external risks are real. The Bank cited the war in the Middle East and the annual review of the Canada-U.S.-Mexico Agreement as the main swing factors. Oil prices have pulled back from April's peak, but a reescalation is always possible. The US trade environment remains uncertain, though the Bank noted that more Canadian businesses are "finding ways to navigate through the uncertainty."

For the mortgage market, the signal is clear: no cut is coming at the next decision on September 2, 2026, and fixed rates will continue to track bond yields rather than Bank action.

Inflation Cooled to 2.8%, Gasoline Was the Driver

Canada's CPI eased to 2.8% year over year in June, down from 3.2% in May, a 0.4-point swing driven almost entirely by gasoline. Crude prices fell as an interim Middle East ceasefire took hold and diplomatic talks eased tensions. Gasoline, which had surged 33.2% year over year in May, slowed to 20.5% in June and fell 10.2% month over month.

Excluding gasoline, the CPI was stable at 2.2% year over year, a signal that underlying inflation pressures are contained. Food purchased from stores rose 3.9% annually, shelter 1.5%, and transportation 6.7%. Month over month, the CPI fell 0.4%, the largest monthly decline since December 2024.

The Bank of Canada's own preferred core measure, which strips out volatile items and takes a weighted trim, sits near its 2% target. That gives the Governing Council room to discuss a cut without worrying about re-acceleration, assuming oil prices hold steady.

Home Sales Hit a 2026 High, Ontario Is Leading the Recovery

National home sales totaled 43,578 units in July, up 0.5% month over month on a seasonally adjusted basis. It was the highest seasonally adjusted sales count of 2026, though still 5.3% below July 2025. The momentum came almost entirely from Ontario, where improved affordability is pulling buyers off the sidelines as prices have retreated from peak levels.

The national average sale price was $674,819, up 0.2% year over year, though that figure masks sharp regional divergence. Ontario and British Columbia both posted year-over-year declines, while every other province saw gains. The CREA Home Price Index was down 3.3% year over year, a sign that the frothy peaks of 2021 and 2022 continue to normalize.

New listings fell for the third straight month, declining 1.6% month over month to 205,388 properties on the market, up just 0.6% year over year but only 1.5% above the long-term average. The market is tightening relative to demand. CREA senior economist Shaun Cathcart called the national read "modestly positive," noting that Ontario was a buyer's market six months ago but is "already halfway back to normal levels," with months of inventory hovering just above the long-term average.

Prices Flip-Flopped, Balanced Territory, Not a Boom

Toronto real estate has been the story. TD economist Rishi Sondhi observed that over the past four months "national sales gains have been almost exclusively driven by Ontario." The province's recovery reflects what happened in more affordable markets earlier in the year: better affordability attracting latent demand, gradual price stabilization, and the return of repeat buyers. It is not a boom. Royal LePage CEO Phil Soper described it precisely: "We're seeing the major markets and most expensive markets reflect the kind of activity we've seen in more affordable markets earlier in the year. That is balanced territory with sales volumes picking up."

Balanced does not mean stable. CREA's Cathcart flagged the fall as the next inflection point. "A lot of the inventory that's hanging around in the summer right now is stuff that didn't sell earlier," he said. "There's usually another big burst of exciting new stuff right after Labour Day. If the buyers are there and eager, you're going to see those numbers pop up in October, November." That inventory surge, combined with renewed buyer interest, could shift the market quickly.

Housing Starts Slid 5%, The Pipeline Still Needs to Clear

The total seasonally adjusted annual rate of housing starts fell 5% in July to 229,074 units, down from 240,773 in June. On an actual (non-seasonally-adjusted) basis, July starts were down 19% year over year across centres of 100,000 or more, at 18,834 units. The year-to-date total of 131,851 units was down 4% from the same period in 2025.

Regionally, Vancouver saw the sharpest pullback: actual starts fell 42% year over year.

Toronto was down 10%. Montreal posted a 3% gain on increased multi-unit activity. CMHC deputy chief economist Tania Bourassa-Ochoa said: "July's results show that housing starts are continuing to moderate and new home construction in Canada is evolving as per our recent Housing Market Outlook Summer Update. Although the pipeline of homes under construction remains substantial and completions are increasing, fewer new projects are being started in many markets, notably in Vancouver, Calgary and Toronto."

Completions rose 8.1% month over month to 19,773 units. The inventory of approved-but-unstarted projects climbed 3% to 141,480, a sign that the supply train is still moving even as new projects are scarce. The message is clear: completions and existing inventory will continue to add supply through late 2026 and into 2027, putting downward pressure on prices in oversupplied markets.

Mortgage Rates Anchored to Bonds, 5-Year Fixed Near 5.25%

The Bank of Canada's policy rate remains at 2.25%, and posted best 5-year fixed mortgage rates sit near 5.25%, consistent with July levels. The gap between the policy rate and posted rates reflects two realities: lenders' cost of funds (driven by bond yields, not the policy rate) and a slowly-recovering deposit base as GICs come to maturity. The Bank's hold through September means the next pricing driver will come from either bond-yield movements or external shocks.

Variable-rate borrowers remain anchored to the policy rate and locked in at the Bank's next move, which the market is pricing as a 25-basis-point cut in December 2026 at the earliest.

Comparison Table: July Month-Over-Month Key Metrics

Our Read: The Market Found Its Footing

July's data reads as a market finding stable ground after months of uncertainty. The Bank of Canada has credibly signaled that no cut is imminent, removing the hope-driven volatility that plagued earlier in the year. Inflation is back near target, unemployment is steady, and home sales have resumed upward momentum for the fourth consecutive month. Brokers and lenders can plan around a rate environment that is genuinely stable, not just frozen by indecision. The real question is whether that stability persists when the fall listing surge hits in September and the Bank makes its next move on September 2. If both prove positive, Q4 could be stronger for transaction volume than the summer was. If either stumbles, the fragile recovery could stall.

What We're Watching Next Month

• Bank of Canada decision on September 2, 2026 (next holding decision; full schedule). Watch for any softening of language around external risks or forward guidance on 2026 cuts.

• CREA August statistics (release mid-September). Cathcart's prediction hinges on this: will the fourth straight monthly sales gain extend, and will the post-Labour Day inventory burst arrive on schedule?

• CMHC Housing Market Outlook and August starts data (release early September). Watch whether the moderation in Vancouver, Toronto, and Calgary continues or whether the large pipeline under construction steadies new starts.