Canadian real estate might be heading toward better days, but don't expect a smooth ride. RBC is predicting a gradual recovery in home sales, though they're warning it'll be anything but steady. The bank has quietly backed away from its earlier "soft landing" optimism, acknowledging what many in the market already suspected: this recovery is going to be messy.

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September Sales Drop Signals Uneven Path Forward

Home sales across Canada fell 1.7% in September on a seasonally adjusted basis. It was the first decline since April, and it broke what had been a string of improving months. Not exactly the momentum anyone wanted to see.

"We expect resales to continue to recover gradually in the year ahead as lower interest rates, and in some markets, lower prices, stimulate buyer demand," said Robert Hogue, RBC's assistant chief economist.

The key word there? Gradually. RBC is banking on lower rates and falling prices to bring buyers back, but they're not offering any timeline for when things return to normal. Reading between the lines, it's pretty clear they don't see it happening in the next 12 months.

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The Soft Landing Story Is Fading

Earlier this year, RBC was more optimistic about a soft landing for Canadian real estate. That tone has shifted. September's pullback was just one piece of a larger puzzle that's looking less rosy. The bank pointed to several ongoing concerns: economic uncertainty, a weakening job market, and affordability that's still stretched thin for most buyers.

Then there are the wildcards. RBC flagged potential shocks like new US tariffs as examples of mounting uncertainty. Their forecast for improving sales over the coming months is what they call a "base case," meaning it's what they think is most likely. But base cases aren't guarantees.

This one rests on two big assumptions: falling interest rates and steady consumer confidence. Those two things don't usually go hand in hand. Central banks typically cut rates when they're worried about deflation or weak spending, both of which stem from shaky confidence. So there's a bit of tension in the forecast right from the start.

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Toronto and Vancouver Face More Pain

If you're in Toronto or Vancouver, RBC's outlook isn't great. The bank expects prices to keep falling in these two markets as inventory continues to climb. And that inventory problem isn't going away anytime soon, with a wave of new home completions about to hit the market.

But here's where it gets interesting. RBC isn't forecasting doom across the country. They see the Prairies, Quebec, and Atlantic Canada holding steady or even seeing price increases. Tight supply and stable demand in those regions could actually push values higher while Canada's biggest cities struggle.

It's what RBC calls "continued regional divergence." Basically, your local market matters more than ever.

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The Forecast Has Some Logical Gaps

RBC's regional outlook raises some questions, though. Take Atlantic Canada. The bank sees Toronto prices continuing to slide while Halifax and other Atlantic markets stay stable or rise, driven by affordability. But here's the thing: Halifax condo prices are already near record highs and closing in on Toronto valuations.

If Halifax becomes more expensive than Toronto in some segments, doesn't that undermine the whole affordability argument? You can't say people are moving there because it's affordable while also saying prices will keep climbing.

There's a broader pattern issue too. National real estate booms are typically driven by credit, not local fundamentals. The cycle usually starts in investor-heavy hubs like Toronto and Vancouver, then spreads outward to smaller markets. These cities led the charge on the way up. Unless something fundamental changes in how markets work, they're likely to lead on the way down too.

RBC sees it differently. They're forecasting continued declines in Toronto and Vancouver as more supply arrives, but they seem to view the rest of the country as rational and responsive to policy, where prices reflect true fundamentals. That includes explaining away the 88.1% surge in Halifax condo prices between 2020 and April 2022, a period that started with the slowest population growth since World War II and came before the 2022 policy changes that triggered record immigration.

It's a lot to reconcile.

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What This Means for Buyers and Sellers

If you're thinking about buying or selling, the takeaway is pretty straightforward: your local market is going to matter more than national headlines. Toronto and Vancouver buyers might find more opportunities as prices ease and inventory grows. Sellers in those markets need to be realistic about pricing and timelines.

In other regions, particularly the Prairies, Quebec, and Atlantic Canada, the dynamics are different. Tight supply could keep upward pressure on prices, which means buyers might not see the relief they're hoping for. Sellers in those areas are in a stronger position, at least for now.

The bigger picture? Volatility is the theme. RBC is clear that this won't be a straight-line recovery. Economic uncertainty, interest rate moves, and regional factors will create ups and downs along the way. Anyone making real estate decisions right now needs to focus on their specific market and their personal financial situation, not just broad forecasts.

And honestly, maybe take those forecasts with a grain of salt. They're useful for spotting trends, but they're built on assumptions that don't always hold up in practice.

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The Bottom Line

Canadian real estate is in a transition period. Some markets will recover faster than others. Some might not recover at all for a while. RBC's forecast gives us a framework, but it's not a crystal ball. The gaps in their logic around regional divergence and affordability are hard to ignore.

What we know for sure: interest rates are coming down, inventory is rising in major cities, and buyer confidence is fragile. That's the reality we're working with. Everything else is educated guessing.

If you're navigating this market and need guidance specific to your situation, that's where working with experienced professionals makes a difference. The broad strokes are helpful, but real estate is intensely local. Understanding what's actually happening in your neighborhood, your price range, and your market segment matters more than any national forecast ever will.