Housing market decline pressures Canadian household spending despite record stock gains

Ottawa —
The ongoing decline in the Canadian housing market is putting pressure on household spending and consumer confidence, despite the strong performance of the local stock market, which has added hundreds of billions of dollars to the financial wealth of households more invested in the markets.

Data shows that Canada was the only advanced economy among the G7 to record a nominal decline in home prices last year, at a time when many households renewed their mortgages at interest rates much higher than pandemic levels.

Home prices have fallen by about 20% since the market peak in February 2022, creating a negative impact on wealth for a wide segment of Canadians, especially since homeownership still represents the largest source of wealth for most households.

Analysts say that the decline in property values not only affects households’ sense of wealth or financial security but also limits their ability to borrow against home equity through home equity lines of credit, a tool used by many Canadians to finance renovations, buy cars, and cover major expenses.

The weakness in the housing market coincided with a slowdown in immigration growth, which reduced housing demand, in addition to new pressures from rising oil prices and borrowing costs in the bond market, which reflected on mortgage rates.

The Canadian Real Estate Association also lowered its market forecasts for 2026 and 2027, amid weak sales and continued caution among buyers and developers.

Economic estimates indicate that the decline in consumption resulting from the housing market correction could reach more than 5,000 Canadian dollars per household in total, with increasing pressures on mortgage holders and rising risks of default.

Although recent retail sales data showed some resilience, experts doubt the sustainability of this momentum due to weak consumer confidence, rising gasoline prices, and ongoing pressures on household budgets.

Meanwhile, the Canadian stock market continued to perform strongly, with the Toronto Stock Exchange main index rising about 7% since the beginning of the year, after achieving significant gains in 2025, which increased the financial asset value of households.

However, the impact of these gains remains limited on the broader economy because stock ownership is concentrated among a smaller and wealthier segment of the population, while about two-thirds of Canadian households own their homes, many of which are still tied to mortgages.

Data indicates that the richest 20% of Canadians own about 70% of financial assets, meaning that stock gains do not compensate to the same extent for the losses or pressures felt by homeowners and the middle class.

Economists see this disparity as explaining the continued caution in spending, despite the strength of financial markets, as most Canadians do not feel the direct impact of stock gains as much as they feel the decline in their home values or the rise in mortgage, fuel, and food payments.

Consumption is expected to remain a weaker contributor to economic growth during 2026, with households continuing to save or reduce spending in anticipation of further financial pressures.

This equation places the Canadian economy before a clear challenge: a strong stock market supporting the wealth of the investing minority, versus a weak housing market pressuring the majority of households and limiting the economy’s ability to achieve broader and more balanced growth.