From the mid-1970s to the early 2000s, real estate rose roughly in line with inflation-adjusted earnings. When prices surged ahead temporarily—like in the late 1970s and 1980s—they corrected quickly, often by 30% or more.
Then everything changed.
Between 2000 and 2022, Canadian home prices exploded by 375%, with almost half of that surge occurring from 2020–2022 alone. Meanwhile, household incomes rose at only 3% per year. The result? The greatest affordability disconnect in modern Canadian history.
And in markets like Toronto and Vancouver, the trend was even more extreme:
GTA home prices jumped 450%
Vancouver soared 490%
At Lendworth, we experienced the same frenzy first-hand as borrowers leveraged record-low rates, ultra-easy lending, and cheap capital to stretch every dollar of home equity. The warning signs were visible in real time—massive price gains with no income fundamentals behind them rarely end smoothly.
How We Got Here: The Fuel Behind the Housing Bubble
For more than a decade, Canada created perfect conditions for runaway real estate prices:
Ultra-low interest rates
Minimal downpayment requirements
Government-backed mortgage risk
Aggressive monetary stimulus (QE)
Foreign capital inflows and weak money-laundering controls
The unlimited principal residence tax exemption
In the GTA, these forces pushed the average sale price from $467,300 in 2012 to an eye-watering $1,281,900 at the 2022 peak — a 2.74x increase in just 10 years, or more than 10% nominal growth per year.
It was unsustainable. And now the unwind has begun.
GTA Prices Are Down 25%—But Still Near Record-Unaffordable Levels
According to the latest data from TRREB:
Average GTA sale price in November: $951,700
Down 25.8% (-$330,000) from the Feb 2022 peak
Prices are now only back to January 2021 levels
That might sound like meaningful progress — until you compare prices to income.
The median after-tax household income in the GTA is $97,000.
Even after a massive correction, home prices still sit at 10x annual income.
At the peak, it was 13x.
Historically, housing markets stabilize around 3x household income.
Canada is still at 8x nationally, despite the drop.
To return to traditional affordability standards, one of two things must happen:
1️⃣ Home prices fall dramatically
or
2️⃣ Household incomes rise dramatically
There is no evidence of a wage boom on the horizon.
Inventory Surging, Sales Stalling — A New Market Reality
This past November wasn’t just weak—it was historically weak.
24,549 active listings, up 16.8% year-over-year
One of the highest November inventory levels on record
Sales near 15-year lows for the month
Cancellation rates are soaring as sellers “wait for spring buyers”
The real wildcard?
A massive wave of investor-owned pre-construction completions arriving in 2025–26, adding even more supply to a softening market.
While some homeowners are choosing to de-list and wait for better conditions, winter inventory buildup sets the stage for intense pressure by spring — especially if buyers remain cautious and mortgage costs remain elevated.
Is the Real Correction Still Ahead?
Corrections are healthy — they restore balance, affordability, and long-term stability. But historically, housing downturns have also triggered:
Job losses
Business failures
Stock market weakness
Household financial stress
Canada’s real estate market became the engine of the economy for two decades. A meaningful slowdown will not be painless.
But it was necessary.
And it may not be over.
Most affordability-based analyses suggest that Canadian home prices would need to fall another 30–50% to reconnect with long-term income fundamentals. That doesn’t mean it will happen all at once — but it does indicate that the path ahead may be more turbulent than many expect.
What This Means for Homeowners, Borrowers & Investors
1. Equity solutions will increasingly matter
Traditional lenders will continue pulling back. Equity-based private mortgages will fill the gap for refinances, debt consolidation, and liquidity needs.
2. Investors must prepare for cash-flow stress
Negative cash-flow pre-construction units face rising payments and declining resale values. Many will require short-term bridge financing or forced sales.
3. Power of sale and arrears will rise
Not dramatically yet — but the trend is shifting. Homeowners with variable-rate products or upcoming renewals are feeling the squeeze.
4. Buying opportunities will emerge
End-users with strong equity positions and investors with liquidity will find more favourable pricing as inventory grows.
5. Speed matters in a changing market
Borrowers need quick access to capital when opportunities or emergencies arise. Traditional lenders move slowly. We don’t.
The Reset Has Begun — Prepare for What Comes Next
After 20 years of runaway appreciation, Canada’s housing market is finally experiencing long-overdue mean-reversion. Prices are retreating, inventory is swelling, and affordability remains far from restored.
The correction so far has been significant — but not sufficient.
As 2026 approaches, the market is entering a new phase where equity, liquidity, and fast decision-making will matter more than ever.
At Lendworth, we help borrowers navigate uncertainty with flexible, equity-based mortgage solutions across Ontario — even when banks say no.
If you're considering refinancing, consolidating debt, or accessing your home equity during this market shift, our team is here to help with fast approvals and transparent options.