The Economic Dashboard
Why the Housing Market Is Improving—But Confidence Still Matters
One of the more interesting developments during the first half of 2026 is that housing fundamentals have improved more quickly than consumer confidence.
Mortgage borrowing has become more affordable than it was a year ago, sales activity has strengthened steadily through the second quarter, and prices have begun recovering from their winter lows. Under normal market conditions, those factors would typically produce a much stronger spring market than we've experienced.
Instead, buyers have remained deliberate.
They are entering the market, but they're taking longer to make decisions, comparing more properties and negotiating more aggressively than they did during the pandemic-driven market of 2021 and early 2022. That caution has become one of the defining characteristics of today's housing market.
The reason appears to have less to do with housing itself and more to do with the broader economic environment.
Interest Rates: No Longer the Whole Story
Interest rates remain one of the most important influences on housing demand, but they are no longer the only story.
After the aggressive rate increases of 2022 and 2023, monetary policy has become considerably more stable. Mortgage rates are lower than they were a year ago, allowing many households to qualify for financing that simply wasn't available twelve months earlier.
Variable-rate borrowers have benefited from previous Bank of Canada easing, while fixed mortgage rates have remained relatively competitive as bond markets have stabilized.
For many buyers, affordability has improved enough to re-enter the market.
However, lower borrowing costs have not created a surge in demand. Instead, they have encouraged a gradual return of buyers who had postponed purchasing decisions while waiting for financing conditions to improve.
That distinction is important because it suggests the current market is being driven by genuine housing needs rather than speculative activity.
Inflation and the Cost of Living
Inflation has moderated significantly compared with the highs experienced several years ago, providing welcome relief for households managing everyday expenses.
Even so, many families continue to feel pressure from higher grocery prices, insurance costs, property taxes and utility expenses. Those ongoing costs influence how comfortable buyers feel taking on larger mortgage commitments, even when financing has become more affordable.
Housing decisions are rarely made in isolation.
When consumers feel financially secure, housing activity generally increases.
When broader household budgets remain under pressure, purchasing decisions tend to become more cautious.
That appears to describe today's market.
Trade Uncertainty and the Canadian Economy
Canada's economy remains closely connected to international trade, particularly with the United States.
Continuing discussions surrounding tariffs and cross-border trade have created uncertainty for businesses involved in manufacturing, transportation and export industries.
Closer to home, Durham Region has long maintained strong ties to Ontario's manufacturing economy. Employment connected directly or indirectly to automotive production, logistics and advanced manufacturing means local consumer confidence can be influenced by changes in international trade policy.
Although these concerns have not significantly affected housing demand so far, they remain important variables to monitor through the second half of the year.
Global Events and Energy Prices
International events continue to influence the Canadian economy in ways that are not always immediately obvious.
Conflict in the Middle East and concerns surrounding shipping through the Strait of Hormuz have contributed to periods of volatility in global oil markets.
Canada is both an energy producer and consumer. Sustained increases in oil prices can affect transportation costs, manufacturing expenses and ultimately inflation.
Should inflation begin moving higher again, central banks may choose to maintain higher interest rates for longer than markets currently expect.
While this remains only one possible scenario, it demonstrates how international events can eventually influence local housing affordability.
Employment Remains the Foundation
Employment continues to be one of the strongest supports for the housing market.
Households are generally willing to purchase homes when they feel secure about future income.
Conversely, uncertainty surrounding employment often delays major financial decisions regardless of interest rates.
Ontario's labour market has remained relatively resilient, helping support housing demand despite broader economic uncertainty.
Continued employment stability will remain one of the most important indicators to watch during the remainder of 2026.
Looking Ahead
The first half of 2026 demonstrated that the housing market can improve even during periods of economic uncertainty.
Sales increased.
Average prices stabilized.
Inventory became more balanced.
Mortgage affordability improved.
The question now becomes whether that gradual progress continues through the fall market.
Much will depend on factors beyond housing itself.
If inflation continues to ease, employment remains strong and borrowing costs remain stable, today's improving market conditions could continue well into the second half of the year.
If consumer confidence weakens because of trade disputes, slower economic growth or renewed inflationary pressure, buyers may continue approaching the market cautiously despite improved affordability.
For now, the evidence points toward continued stabilization rather than rapid appreciation or renewed decline.
Five Trends We Will Be Watching This Summer
Rather than trying to predict the market, here are the five indicators I'll be watching most closely over the coming months:
1. Will sales continue to outpace new listings?
If buyer demand continues absorbing new inventory, market conditions should become increasingly balanced heading into the fall.
2. Are prices continuing their gradual recovery?
The trend since winter has been encouraging. Continued month-over-month stability would reinforce confidence that the market has moved beyond its correction phase.
3. What will the Bank of Canada do next?
Interest-rate decisions—and just as importantly, the Bank's commentary—will continue influencing buyer confidence and mortgage pricing.
4. Will inventory continue to stabilize?
Elevated inventory has benefited buyers. Watching whether that supply begins to normalize will provide important clues about pricing pressure later this year.
5. Will confidence catch up to affordability?
Perhaps the biggest question facing the housing market today is not whether buyers can afford to purchase—it is whether they feel confident enough to do so.