TD Slashes 2026 Ontario Housing Forecast: Why the Recovery Is Taking Longer Than Anyone Expected

In December 2025, TD Economics painted an optimistic picture for Canada's housing market: national home sales would jump 9.3 percent in 2026, with Ontario leading the way at 13 percent growth. Three months later, that forecast has been torn up. TD now expects national sales to decline 1.8 percent year-over-year, and Ontario — once projected to lead the recovery — is now forecast to see a 3.2 percent drop in transactions and a 4 percent decline in average prices.

It is one of the most dramatic forecast reversals in recent memory, and it tells a story about where Ontario's housing market actually stands heading into spring 2026.

What Changed in Three Months

The shift was not driven by a single event but by a confluence of factors that caught even experienced forecasters off guard. TD economist Rishi Sondhi pointed to three key forces:

• Persistent economic uncertainty. Trade tensions between Canada and the United States have cast a long shadow over consumer confidence. The threat of 25 percent tariffs on Canadian imports — and Canada's retaliatory countermeasures — has created a level of uncertainty that is keeping would-be buyers on the sidelines. For major purchases like homes, uncertainty is a deal-killer.
• A sluggish first quarter. Home sales across Ontario were materially weaker than expected in January and February 2026. TRREB reported a 19.3 percent year-over-year decline in January sales and a 6.3 percent decline in February. New listings also fell — down 13.3 percent in January and 17.7 percent in February — but not fast enough to tighten the market meaningfully.
• Pent-up demand that refuses to materialize. This is perhaps the most telling point. The industry has been banking on more than 100,000 sidelined buyers in the GTA alone eventually returning to the market. So far, they have not. As Sondhi noted, pent-up demand "has not re-emerged as swiftly as earlier anticipated," and additional price reductions may be needed to draw buyers back.

The Numbers in Context

To understand how significant this revision is, consider the gap between the old and new forecasts:

Ontario received the most substantial downgrade of any province, reflecting the particular challenges facing the GTA market — elevated inventory, ongoing affordability pressures, and a condo sector that remains under significant stress. The MLS Home Price Index Composite benchmark in the GTA was down 7.9 percent year-over-year in February, and the average selling price of $1,008,968 was 7.1 percent below the prior year.

What This Means for the Industry

For real estate professionals in Ontario, the revised forecast demands a recalibration of expectations for 2026:

• Volume will remain constrained. TRREB's own outlook projects 60,000 to 70,000 GTA transactions for 2026 — consistent with the depressed levels of the past three years. Agents who built their businesses around peak-era transaction volumes need to adjust their strategies and budgets accordingly.
• The condo market remains the most vulnerable segment. Toronto condos are in a deeper correction than the freehold market, with elevated inventory, slowing investor demand, and a wave of new completions adding supply. Agents working in this segment need to be especially diligent with pricing guidance.
• The second half may still bring improvement. Both TD and TRREB have left the door open for a recovery later in the year, contingent on improved economic conditions and consumer confidence. TD projects a robust 9.6 percent rebound in national sales by 2027, suggesting the current weakness is temporary — but the timeline has been pushed out.
• RECO's transformation adds a regulatory overlay. While the market adjusts, the Real Estate Council of Ontario is advancing eight major transformation initiatives for 2026, including enhanced financial oversight of brokerages. Agents and brokerages should expect increased compliance requirements in the months ahead.

Looking Ahead

The housing recovery Ontario was hoping for in 2026 is not cancelled — it is delayed. The forces that will eventually drive a rebound remain intact: population growth (even if temporarily moderated), a structural housing shortage, pent-up demand from years of suppressed sales, and interest rates that have declined meaningfully from their 2023 peaks. But the catalyst that converts those forces into actual transactions — consumer confidence — is proving stubbornly elusive.

For now, the market sits in a holding pattern. The HST rebate that launched today may help on the new-build side, and any resolution on the trade front could unlock activity quickly. But until those factors align, Ontario's housing market is recovering more slowly than anyone — including the banks — anticipated.