December can make the housing market look calmer than it really is. Parliament adjourns, market activity slows and analysis shifts toward year-end wrap-ups. In housing, that slowdown is often seasonal rather than meaningful. Many decisions are simply pushed into the new year.

As activity eases, headlines become less urgent and the data can start to look balanced. It is easy to mistake that pause for improvement.

Experienced observers know this pattern well. Late in a market cycle, changes tend to be subtle. Prices stop moving sharply but do not recover. Sales slow without collapsing. Behaviour adjusts before confidence returns. What appears to be calm often reflects fatigue and caution rather than renewed strength.

That is how 2025 ended. Sales softened but did not break. Prices drifted rather than reset. Inventory sat near levels that once signalled stability. The picture was not alarming, but it was not comforting either.

Canada has been here before. This phase often appears when a market has adjusted just enough to keep moving, but not enough to resolve underlying pressure. The risk is not that the data looks obviously bad. It is that familiar signals are taken at face value when they deserve closer scrutiny.

December was Soft, But Not Directional

National home sales declined 2.7% month over month in December, according to the Canadian Real Estate Association. On an annual basis, actual sales activity came in 4.5% below December 2024. For the full year, transactions totalled 470,314 units, a decline of 1.9% from the prior year.

On their own, these figures invite over-interpretation. In context, they should not. CREA noted that December’s pullback reflected coincident slowdowns across several major markets, including Vancouver, Calgary, Edmonton and Montreal, rather than a single national catalyst. That distinction matters. When weakness is diffuse and uncoordinated, it is less predictive.

Viewed across the full year, 2025 followed a recognizable pattern. Early activity stalled amid tariff-related uncertainty. Mid-year brought a modest revival as conditions stabilized. Momentum then faded again heading into year-end. What we saw was a market negotiating with constraints.

Balance has Returned, But Conditions Remain Fragile

By December, national balance metrics had largely normalized. The sales-to-new listings ratio eased to 52.3%, close to its long-term average. Months of inventory edged up to 4.5, still below the historical norm of 5.0.

By conventional definitions, this describes a balanced market. For practitioners, it is worth remembering what balance does and does not capture. These measures describe the flow between buyers and sellers in the present. They do not speak to resilience, conviction or financial capacity under stress.

Active listings were 7.4% higher than a year earlier, yet still nearly 10% below long-term seasonal averages. Inventory trended lower after May, driven by the mid-year rebound in demand. Should spring activity in 2026 materialize as expected, supply conditions could tighten again quickly, even as affordability remains stretched.

Balance, in other words, has returned by arithmetic. Stability has not necessarily followed.

Price Softening is Concentrated Where Risk is Highest

National average prices were effectively unchanged in December, down just 0.1% from a year earlier. The MLS Home Price Index offers a more revealing view. Benchmark prices declined 0.3% month over month and were down 4% year over year.

The softness is not evenly distributed. British Columbia and Ontario’s Greater Golden Horseshoe accounted for a disproportionate share of national price declines. Condo apartments and townhomes recorded larger year-over-year drops than detached homes.

This pattern is not accidental. These segments sit at the intersection of stretched affordability, investor exposure, and refinancing sensitivity. The data suggests that price discovery in this cycle is occurring gradually, through time and selective adjustment, rather than through forced selling.

Mortgage Behaviour Explains Why The Market Feels Fragile

To understand why the market feels fragile despite balanced conditions, it is necessary to look beyond sales and prices. The Bank of Canada’s financial stability indicators provide insight into how households coped last year with economic realities.

Mortgage originations rose (again), driven largely by renewals rather than new demand. To manage payments, borrowers stretched amortizations and increasingly chose shorter fixed-rate terms, expecting refinancing conditions to improve in the years ahead.

As policy rates eased, loan-to-income ratios climbed. Small affordability gains were converted into larger debts rather than saved. While regulatory limits appeared to be holding back the most extreme borrowing, leverage spread more broadly across the market.

At the same time, fewer buyers entered with meaningful equity buffers. Minimum down payment mortgages became more common among first-time buyers.

What This Means for 2026?

Canada did not end 2025 on the edge of a housing downturn. It also did not emerge on solid footing. The market is functioning, but it is doing so by leaning on longer amortizations, higher leverage, and thinner equity buffers.

For people who work in or depend on the housing market, the key point is that balanced supply and demand numbers can be misleading. A market can look stable while financial stress continues to build underneath. Sales can pick up without affordability or household balance sheets actually improving.

How the market behaves this year will be determined by endurance more than anything else.

Foch : Canada’s Housing Market Ends 2025 Balanced, Not Resolved by Daniel Foch | REM Real Estate Magazine