There's something clarifying about a big bank revising its forecast by this much in three months.

In December, TD Economics was calling for a 9.3% jump in national home sales for 2026 and a 4.1% rise in average prices. That was the recovery story: pent-up demand finally off the sidelines, buyers locking in rates, sellers getting some pricing power back after years of grinding correction. Then Q1 arrived. And on March 26, TD economist Rishi Sondhi published a provincial housing outlook that rewrote the whole thing.

TD now expects national home sales to fall 1.8% year-over-year in 2026, with the national benchmark price edging down 0.3%. Not a collapse. But not the recovery that buyers were hoping would lift all boats.

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What Actually Happened to the Recovery

The short version is that it stalled before it really got going.

Sondhi pointed to weak performances in Q4 2025 and especially Q1 2026 as the trigger for the revision. Weather played a role in Central and Atlantic Canada, where harsh winter conditions kept activity suppressed. But the more telling detail in the report is that weakness was also showing up in British Columbia, where the weather excuse doesn't apply. Buyers in BC simply weren't moving. Sondhi described them as likely "waiting for a clearer bottom" on prices, constrained by affordability, and hemmed in by a soft economy and ongoing cost-of-living pressure.

The national numbers tell part of the story. CREA's February 2026 data showed home sales down 1.3% month-over-month, with the MLS Home Price Index off 4.8% year-over-year. The national non-seasonally adjusted average came in at $663,828, barely changed from February 2025. Activity running 8.1% below year-ago levels. That's not a market in recovery mode.

And yet, other forecasters have held onto more optimistic numbers. CREA's January 2026 forecast still called for a 5.1% increase in national sales and a 2.8% rise in average prices for the year, with BC and Ontario expected to lead that recovery. CREA's next update isn't until April 16, so there's a live question about whether those numbers hold.

RBC's view, published last August, was already more cautious, projecting a 0.7% national price decline in 2026 with Ontario and BC facing the steepest drops from decade-high inventory and seller competition. TD's new numbers land closer to RBC's assessment than CREA's.

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Ontario and BC Take the Steepest Cuts

The regional picture in TD's report is where things get specific.

Ontario and British Columbia received the sharpest downgrades of any province. TD now expects transactions to fall 3.2% in Ontario and 0.2% in BC, with prices sliding 4% and 1.2% respectively. These are meaningful cuts from what TD projected three months ago.

Sondhi's explanation is straightforward: affordability is strained, prices haven't fallen far enough to pull buyers off the fence, and pent-up demand "has yet to re-emerge as quickly as previously expected." He added that further price declines might actually be needed to unlock that demand in Ontario and BC, a notable statement from a major bank economist.

For BC specifically, CMHC's Housing Market Outlook reinforces the cautious tone. International migration to the province is declining in 2026 due to slower non-permanent resident flows, which reduces rental and investor demand and limits resale activity. BC's economy is expected to post below-trend growth this year, weighed down by demographic, housing, and trade-related headwinds. The province had 7.8 months of supply as of February, which puts it firmly in buyer's market territory.

The Okanagan, which outperformed the broader BC market through much of 2025, is not entirely insulated. CREA benchmark prices in the region moved sideways through the first part of the year. As we noted in our analysis of February's buyer survey data, local demand remains genuine and equity-backed rather than speculative. That structural characteristic matters. But it doesn't mean the Okanagan is immune to provincial headwinds.

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The Oil Factor and the Prairie Divide

Here is where the TD report gets more interesting, and more geopolitically contingent.

Middle East tensions pushed oil prices sharply higher in early 2026. TD's models suggest that if oil prices stay elevated, average home prices in Alberta could end up roughly 1% higher by late 2026 than they would have been under prior assumptions. Saskatchewan could see about half that gain. These are not enormous numbers, but they go in the opposite direction from the national trend.

The logic is direct. Higher oil prices lift revenue for energy-producing provinces, support employment, and put money into household budgets in ways that show up in housing demand. For markets like Calgary, Edmonton, and the Saskatchewan cities, this is a genuine tailwind. For BC and Ontario, higher energy costs work the other way, squeezing purchasing power at a moment when buyers are already stretched. As we covered in detail in our piece on oil prices and the Canadian housing market, this dynamic has been reshaping the regional picture through Q1 2026.

Alberta's market has also been rebalancing from a different starting point. New supply met normalized demand, taking some heat out of a market that ran hot through 2024 and early 2025. That rebalancing, combined with oil support, puts Alberta in a different position from BC's ongoing softness.

Saskatchewan and Manitoba benefit from tighter starting conditions and still-decent affordability relative to national averages. TD sees firmer gains in those markets through 2026, a view that aligns with CMHC's assessment of the Prairies outperforming the national trend.

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The Question Hanging Over 2026

Sondhi's report is honest about uncertainty. He notes that the same Middle East shock that supports oil-producing regions could hit oil importers harder, and that CUSMA renegotiations remain a risk to the broader economy. But he also flags genuine upside: the same pent-up demand sitting on the sidelines in Ontario and BC could re-enter faster than expected if prices fall enough or if confidence returns. That's the swing factor.

The Bank of Canada held its policy rate at 2.25% at its March 18 meeting. TD's outlook treats interest rates as roughly neutral for housing in 2026, with no major moves expected in fixed mortgage rates either. That removes one lever that buyers were counting on. The recovery, if it comes, won't be rate-driven. It will be confidence-driven, which is harder to predict and slower to build.

TD's base case is that housing activity spends most of 2026 clawing back Q1 losses. The actual recovery comes in 2027, when improved economic conditions, a better job market, and accumulated affordability gains from prior price declines in Ontario and BC are expected to support a rebound. TD currently forecasts national home sales jumping 9.6% in 2027, with average prices up 2.7%.

That's a fragile rebound built on a lot of assumptions holding. But it does suggest that for buyers with flexibility and a medium-term horizon, waiting for the coast to look clear in 2026 may mean showing up just as conditions improve in 2027.

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What This Means for the Okanagan

National headlines and TD forecasts describe the landscape, but the Okanagan operates within it on its own terms. Local demand, as the February buyer survey showed, is primarily people already here making long-term decisions, not speculative outsiders chasing trends. That makes this market more resilient to sentiment swings than places like Vancouver or Toronto, even if it doesn't fully escape provincial price pressure.

For buyers, the picture is a patient one. Inventory remains generous by historical standards. Sellers are competing for attention in a way they weren't two years ago. And if TD's timeline is right, pricing power begins to shift modestly as 2026 progresses and 2027 approaches.

For sellers, pricing accurately for current conditions is not optional. The buyers in this market are informed and not in a hurry.

If you want to understand what the current conditions mean for your specific situation in Kelowna or the broader Okanagan, the team at Coldwell Banker Horizon Realty is here to work through it with you. Local knowledge matters more than ever when national forecasts are pointing in different directions.