Reading tip: This article was compiled and published in January 2026. The data and market judgments in the article reflect the market snapshot at that time. The real estate market, mortgage interest rates, and personal loan qualifications change over time and personal circumstances, and this article does not constitute a commitment to purchase or sale, investment returns, or loan approval.

2025 has become the slowest year for second-hand housing transactions in the Greater Toronto Area (GTA) in at least 20 years. Entering 2026, the core question facing the Toronto real estate market is no longer just "will housing prices fall?" but when inventory, purchasing power, seller expectations and market confidence will regain balance.

01 Record-breaking downturn and market reversal

Ontario’s real estate market is undergoing a significant game changer. Data shows that in December 2025, about 84% of homes in Ontario were sold for less than the listing price, setting a record for at least 10 years.

A common strategy among real estate agents over the past decade has been to “list your property low and wait for the markup.” Today, this model has failed: the market is no longer about buyers competing to raise prices, but buyers are lowering prices, and sellers have to adjust prices to complete the transaction. The ratio of median sales to listing prices for homes in Ontario fell to 96.4 per cent, the lowest level ever recorded for the data set.

02 From “supply shortage” to “lack of demand”

Unlike the "shortage of listings" before interest rates rose in early 2022, the current market is facing a shortage of buyers and limited purchasing power.

  • Inventory overstock: Inventory levels are at 15-year highs, and pressure is particularly evident in the apartment market.
  • The transaction cycle is lengthened: Home sales have slowed significantly, and average days on market have returned to 2014 levels.
  • Buyers are more cautious: Uncertainty about the economic outlook, coupled with expectations that housing prices will continue to adjust, makes homebuyers reluctant to chase prices higher.

03 Four years of gains are being given up

Home prices have fallen almost every month of the past year (except January). From its high point, house prices have fallen by about 30%, gradually approaching 2020 levels, meaning that most of the gains over the past four years have disappeared. By January 2026, the average market price may fall below the 1 million Canadian dollar mark.

Although the transaction volume of detached houses increased by about 10.5% year-on-year, prices still fell by about 4.5%; apartment prices fell by about 7% year-on-year. A partial recovery in trading volume does not mean that the price trend has reversed.

04 Seller’s withdrawal does not mean supply disappears

The number of contract terminations (Terminated Listings) has reached a new high, which is a signal worth noting. Some sellers were unwilling to accept lower prices and chose to withdraw from the market, while others planned to relist their properties in the future.

Therefore, the current market is more of a "backlog of supply" than a "backlog of demand." Measured by median income and house price levels, the number of people who can afford to buy a house is still limited. The listings that were delisted today may reappear in the future; if the seller's cash flow is under pressure, some of them may also be converted into supply that is more willing to complete the transaction.

05 Buyers and sellers need to adapt to new rules

In a market where buyers occupy greater negotiating space, trading methods are returning to rationality.

  • For buyers: Offers below list price are no longer uncommon, and conditions such as home inspections, financing, and selling your existing home are returning. There is more room for negotiation on the price, but the condition of the home, financing capabilities and carrying costs still need to be carefully checked.
  • For sellers: The strategy of simply “listing, waiting, and praying” is no longer effective. When there is a real need to sell, the real price should be based on recent comparable transactions (Comps), rather than referring to neighboring transaction prices during the peak period in 2022.

06 Is it a “crash” or a long bottoming out?

The current market is more like a slow grind down than a quick crash. A rapid decline is often accompanied by a rapid price adjustment; a prolonged bottoming will cause inventory, purchasing power, and sellers' expectations to be repriced little by little.

It was like a long ebbing tide, not a sudden tsunami. As the tide recedes, problems that had been hidden behind the surface—high leverage, mispricing, and lack of demand—will gradually emerge. For sellers with high mortgage pressure and tight cash flow, a long-term adjustment may be more difficult than a rapid decline.

07 Has the opportunity to “buy the dip” emerged?

The increased negotiation power of buyers does not mean that all properties are worth buying, nor does it mean that the market has confirmed that it has bottomed out. A real opportunity needs to meet several conditions at the same time: the price has sufficient headroom compared with recent transactions; the home itself and the location meet long-term needs; the down payment, monthly payment, property taxes, management fees and maintenance costs are affordable; and the family's cash flow has a buffer even if interest rates or income change.

For families who plan to live there for a long time, have stable financing conditions, and can withstand short-term price fluctuations, a market downturn may provide a more leisurely viewing time, more complete condition protection, and greater room for negotiation. For buyers who rely on short-term appreciation, have tight cash flow, or require high leverage to close a deal, being "cheap" can still come with higher risks.

Conclusion

The core of the Toronto housing market in 2026 is not to guess the lowest point, but to determine whether the price, housing quality, financing costs and household cash flow match. The bottoming may continue, and opportunities may gradually appear, but both can occur at the same time. Real estate sales and mortgage arrangements should be based on affordability, risk tolerance and long-term use value, rather than being driven by slogans of "crash" or "buying the dip".

Source: Daniel Foch Toronto Real Estate Market Analysis Video

January 19, 2026 Henry Wang in Toronto