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Home price deflation is underway in many high-population centers in Canada and America, see Housing Market Is Shifting Back Toward an Advantage for Buyers on the front page of yesterday’s Wall Street Journal: “The proliferation of discounts and incentives offers the latest evidence that the housing market is tilting back in the buyer’s favour.”

The US housing market had over 600k more sellers than buyers in December —the largest such gap on record in seasonally adjusted data going back to 2013 — and 62% of buyers last year purchased a home below the original listing price — the highest proportion since 2019 (Redfin data). The average discount for the homes that sold below their original listing price was around 8% — the largest since 2012.

Existing homeowners tend to be more price-anchored and less willing/able to reduce, but builders are in the business of building and selling homes, not holding them. Builders have been slashing prices and offering incentives (free upgrades, reimbursement of closing costs, mortgage rate buydowns, etc.).

The premium for new over existing US homes has fallen to zero for the first time in at least a decade (shown below since 2015, courtesy of John Burns Research). A downtrend in new-home prices typically pulls resale prices lower as well.

Prices are moving lower, but the scale of the bubble that was is still hard for many to appreciate.

Here’s a downtown Toronto condo, purchased for 698K in October 2022, tried selling for 750K in May 2023, then down to 500K by last month, just relisted for 525 K.

Here’s another 2-bed, 2-bath, 1-parking with balcony, nicely updated, last sold in May 2018 for $580k, now asking $499k — 14% lower than it sold for 8 years ago.

And the markdowns are happening far beyond downtown condos.

In December 2020, amid the COVID-19 pandemic, a builder purchased a bungalow in a desirable location, steps from Lake Simcoe, one hour north of Toronto, for $690k (see here). After demolishing the original home, they built a modern two-storey house with all the modern amenities, which was listed for 2.195m in September 2022 (shown below). Unfortunately for the builder, their listing was posted 7 months after Canada’s housing bubble had burst in February 2022.

After two years and five months of markdowns and relistings, the property remains for sale, now asking 1.399m (shown below).

When these properties finally sell, they will serve as comparables for other listings in the area. And with many disgruntled owners taking properties off the market last fall, spring listings are poised to surge.

Canada’s average home sale price was $674K in December 2025 (per CREA data). some 39% higher than $484,500 in 2018 (pre-COVID). To return to historical affordability norms at 3-4 times the average household income (approximately 84K nationally) range, home prices nationally would need to fall below 2018 price levels.

Buyers can prepare by building their downpayments, defining their budget, targeted area and type, and by realizing the magnitude of price bubbles now reversing. Sellers can prepare by being pragmatic and understanding the magnitude of bubbles now bursting.

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