The Sharpest Big-Bank Forecast Reversal of the Cycle — and What It Means for Ontario Homeowners Heading Into Spring
A 'New Price' sign in front of a house reflects current trends in the housing market. The image captures the dynamic pricing strategies in real estate. (Credit: Shutterstock)
Three months is a long time in Canadian housing. In December, TD Economics projected a strong 2026 rebound — national home sales rising 9.3% year-over-year, average prices climbing 4.1%. It was the kind of forecast that let homeowners exhale. Spring would fix things.
That forecast is gone. In a revised outlook published March 26, TD economist Rishi Sondhi reversed course entirely: national sales are now expected to fall 1.8%, and average prices to edge down 0.3%. Ontario — where TD had forecast a 13% jump in sales and modest price gains — received the steepest downgrade of any province, with prices now expected to decline four per cent.
This is not a minor technical adjustment. It is the sharpest directional reversal any major Canadian bank has issued this cycle, and it lands at a moment when roughly a million households are renewing mortgages at rates far above what they originally locked in.
The scale of the revision is easier to grasp in a table than in prose.
Sources: TD Economics forecast tables, March 2026 Quarterly Economic Forecast, CBC reporting.
The numbers tell a consistent story: TD went from expecting a broad-based recovery in volumes and prices to expecting another year of contraction in both. The downgrade was not limited to one metric or one region. Every line moved in the same direction.
What happened between December and March? TD's own explanation, laid out in a February Q&A, points to a weaker-than-expected first quarter — especially in Ontario and B.C. — that forced the bank to rethink its assumption that pent-up demand would return quickly. January storms in Central and Atlantic Canada weighed on activity early in the year, but weakness was also evident in British Columbia, where conditions were more temperate, suggesting the slowdown was not just weather-driven.
By February, TD had already cut its national average price growth forecast from 4.1% to roughly 1.3%. The March revision pushed it further, into negative territory.
Ontario's downgrade stands out not just because it is the largest, but because the province was already operating from a position of weakness. TD's own provincial housing outlook, published in January, described Ontario as the weakest housing market in Canada — the province with the steepest price drop of any region in 2025 and persistent underperformance since 2023.
The January report also warned that loose supply-demand conditions would keep Ontario's average price growth negative through the first half of 2026, with only a marginal inch into positive territory later in the year. The March national revision effectively confirmed that even that modest expectation was too optimistic.
British Columbia is in a similar position. Home sales fell roughly 6% and average prices declined about 3% in 2025, with the Vancouver market performing worse than the provincial average. Resale condo inventories remain highly elevated, keeping supply-demand conditions loose. But Ontario's combined scale — the largest provincial housing market by volume — and its steeper price decline make it the focal point of the national story.
TD is not the only major institution flagging Ontario weakness. CMHC's 2026 national housing outlook reached a similar conclusion: Ontario prices are likely to keep falling in 2026, with recovery not expected until 2027. CMHC attributes this to plentiful resale supply, weak sales activity, and a large wave of mortgage renewals that could push financially strained borrowers to list.
The timing of this forecast reversal is what makes it consequential for households, not just analysts. An estimated 1.2 million fixed-rate mortgages were scheduled to renew in 2025, with roughly 980,000 more coming due in 2026 — more than two million renewals across two years, representing over $300 billion in mortgage debt.
For homeowners renewing this year, falling prices compound the stress in a specific way. TD itself quantified the mortgage renewal payment shock in a separate report: a borrower with a $500,000 mortgage originated at 2.5% in mid-2020 and renewing at around 4.0% would see their monthly payment rise by roughly $320. TD concluded that most borrowers will manage, but with less financial flexibility.
Now layer on the price revision. A four per cent decline in Ontario home values means the equity cushion that homeowners were counting on — for a HELOC draw, a refinance, or simply the comfort of knowing their home is worth more than they owe — is thinner than it was three months ago. For some homeowners, a 4% price decline on a $700,000 property is $28,000 in lost equity. That is real money at a moment when monthly payments are about to go up.
Bank of Canada research has found that equity extraction through HELOCs and refinancing has historically accounted for roughly 7% of Canadian spending on durable and semi-durable goods and about 35% of renovation spending. When home values fall and equity extraction slows, the effects ripple beyond housing into household spending and home improvement activity.
TD is not forecasting a prolonged crash. The bank's March Quarterly Economic Forecast projects a rebound in 2027: home sales jumping 9.6% year-over-year and average national prices rising 2.7%. But the recovery is conditional, not guaranteed.
The conditions TD cites for a 2027 turnaround include improved economic and job market conditions, a gradual return of pent-up demand, and slower population growth stabilizing supply-demand dynamics — with more meaningful help from population growth in 2028 and 2029.
On the rate front, TD's forecast shows the Bank of Canada's overnight rate holding flat at 2.25% from late 2025 through at least late 2027, with five-year Government of Canada bond yields hovering around 3.0%. That implies only modest relief in fixed mortgage rates over the forecast horizon — not the kind of rate cuts that would unlock a surge of sidelined buyers.
TD also flagged risks that could push the outlook in either direction. Broader or more prolonged geopolitical tensions could weigh more heavily on oil-importing provinces like Ontario, while potentially supporting activity in oil-producing regions. Upcoming CUSMA negotiations add another layer of uncertainty for the broader economy.
Housing starts are also expected to trend lower — from 258,000 units in 2025 to 236,000 in 2026 and 222,000 in 2027 — as demand softens and earlier overbuilding, particularly in condos, works through the system. That means homeowners should not expect a construction-led rebound to quickly lift the market.
This is a forecast, not a fact sheet. What TD projected in December changed dramatically by March. The March projection could shift again. But there are specific signals worth monitoring:
Forecasts are not guarantees. CREA also downgraded its 2026 outlook earlier this month, citing tariff uncertainty. The directional agreement between TD, CREA, and CMHC does not make the outcome certain — but it does narrow the range of plausible scenarios. If three major institutions are all pointing to a flat-to-negative 2026, the burden of proof has shifted to anyone forecasting a strong spring rebound.
For homeowners planning a HELOC draw, refinance, or sale in 2026, the practical takeaway is straightforward: pressure-test your numbers against a four per cent Ontario price decline, not the flat-to-positive scenario most assumed heading into spring. That is not pessimism. That is what the banks are telling their own clients.
