In my neighbourhood, 1 hour north of Toronto, several homes in the 1m+ price range have been for sale for over a year with no takers, even though asking prices have been reduced by more than 30% to date.
Affordability remains untenable for most because prices are still above the historical standard of less than 4x household income. The table below shows the price-to-income picture across Canada’s provinces, combining CREA average home price data (2026) with Statistics Canada’s official median after-tax household income figures (Canadian Income Survey, most recent official data).
Canadian mortgage rates are historically moderate today, with 5-year fixed rates around 4% and variable rates around 3.4%. The trouble is that more than two-thirds of Canadian homeowners with mortgages bought or refinanced in 2020-2022, when interest rates were at all-time lows and home prices reached bubble highs.
In 2020–2021, the 5-year fixed rate dropped as low as 1.34%–1.44% (special discounted offers), with some sources citing sub-1.5% deals for highly qualified borrowers between September and October 2021. The 5-year variable rate fell even lower, to around 0.85%–0.99%, with some special offers dipping toward 0.88% in late 2021.
Unnaturally low interest rates enabled all kinds of extreme spending and gambling that is now retreating, while debt weight continues to compound and renew at normalized interest rates.
The same can be said of corporate security prices, which also reached bubble valuations on unnaturally low interest rates and speculation. The tide has not yet retreated fully there to reveal a world of naked swimmers, but as with mean reversion in housing markets, it’s a question of when, not if.
The discussion below examines the psychology that inflated home prices and leverage to destructive levels.
Special Guest John Pasalis: President and Broker of Record at Realosophy Realty Inc. Brokerage. What’s really going on in Ontario Real Estate: let’s get some honest answers from a true expert. Why John saw the 416 Condo Crash coming years before prices started dropping. The long list of mistakes made by all levels of Government. The myths & reality that fueled the wild price run-ups from 2009 to 2022. Here is a direct video link.
