Canada’s real estate market has always moved in cycles, and since 1975, there have already been four major corrections. The one we’re living through right now marks the fifth. Naturally, the question everyone is asking is whether this downturn will be short and sharp, like in 2017, or whether it will drag on for years, like the slump that started in 1989. Looking back at history helps us get some perspective.
The first big correction came between 1981 and 1983, when interest rates soared and housing prices tumbled by more than 30%. It was the steepest drop Canada has ever seen. Then, in 1989, the market began another decline that stretched out for more than six years. Prices fell by more than 20%, and instead of a quick rebound, the market languished in a long, drawn-out slump.
The third downturn happened during the global financial crisis in 2008–2009. Prices slipped only about 8%, and thanks to Canada’s relatively strong banking system and swift rate cuts, the housing market bounced back quickly. In 2017, many people remember how the foreign buyers’ tax and new mortgage stress tests cooled things off. Prices slid about 13% and stayed weak for nearly two years before regaining strength.
The current adjustment began in early 2022. Since then, home prices have already dropped more than 30%. What took six years in the 1990s has played out in just three and a half years this time. It’s the sharpest and fastest decline since the early 1980s crash, which makes this correction feel very different from the short-lived dips of 2008 or 2017.
When you line up the numbers, the story becomes clearer. The early 1980s saw a 30% drop over three and a half years. The 1990s cycle dragged on for nearly seven years with a 27% decline. The global financial crisis knocked prices down just 8% in a little over a year, and the 2017 adjustment pulled prices back about 13% in two years. Now, since February 2022, the market has already fallen 30%, and the correction is still underway.
What makes today’s market feel so familiar is how closely it resembles the late 1980s and early 1990s. Both cycles were marked by high interest rates and declining affordability. Back then, mortgage rates sat stubbornly between 8% and 10% for years, while today they jumped quickly to 6–7% before easing slightly. In both cases, the economy was under stress. In the 1990s, unemployment surged. Today, households are drowning in debt, and the job market feels increasingly fragile.
Government policy has stepped in before and is doing so again now. In the 1990s, the Home Buyers’ Plan and new immigration policies were introduced to prop up demand. Today, we’re seeing similar efforts with first-time buyer programs, CMHC support, and record immigration levels. But just like back then, high borrowing costs are blunting the effect, stretching out the adjustment rather than triggering a quick rebound.
If history is a guide, this downturn isn’t going to turn around overnight. It’s not shaping up to be a quick blip like 2008 or 2017. Instead, it looks much more like the 1990s: a sharp fall at the beginning, followed by a long period where prices stay flat before they finally start climbing again. In other words, Canada’s housing market may be in for a slow, drawn-out recovery rather than a sudden snap back.