When we look back at Canada’s real estate history, there have only been three periods when home prices didn’t rise or even fell for more than three years, from 1979 to 1984, from 1989 to 1994, and right now. It’s interesting to revisit those earlier cycles, not just for the numbers but also for the psychology of the time.
Back in the early 80s, social media didn’t exist, so the only way to gauge sentiment was through mainstream newspapers. The headlines were strikingly familiar. The Toronto Star in 1981 declared, “The Era of Easy Money in Real Estate Is Over.” In 1982, The Financial Post wrote, “Toronto’s Real Estate Turns from Money Tree to Hot Potato.” The following year, Maclean’s ran a cover story asking, “Why Real Estate Is No Longer the Best Investment.” If you replace the dates with 2025, you’d think nothing has changed.
So what actually happened then? In 1981, inflation in Canada hit 12%, and the prime rate soared to 21.75%. Mortgage rates were as high as 18-20%. Buying a home was nearly impossible. But once interest rates peaked, inflation started to come down, that’s how cycles reset. Rates dropped to around 11% by 1983, and with inflation under control, buyers slowly returned. The market stabilized and began rising again by 1984.
From 1979 to 1982, home prices first surged 18%, then growth slowed to 7%, then 4.5%, and finally dipped about 5% in 1982. But by 1984, recovery had already begun. Transactions, however, dropped sharply, just like what we’re seeing now. And the rebound after 1984 was powerful: prices jumped 60% over the next five years as pent-up demand was unleashed.
The next correction was deeper and longer. In 1989, inflation returned, prime rates climbed from 9% to nearly 15%, and mortgages cost around 12%. The result was severe, prices dropped about 40% over seven years, and when you adjust for inflation, the real decline exceeded 50%. By 1993-1994, the economy was in deep recession, unemployment was 11%, and the headlines were once again grim: “Toronto’s Real Estate Golden Age Is Over”, “From Heaven to Hell”, “The Lost Decade Has Begun.” It all sounds eerily familiar, doesn’t it?
Every cycle shares common traits. During the downturn, media narratives converge: real estate is “dead,” “no longer a good investment,” “a lost decade.” But before each downturn, there was always a surge, a boom driven by cheap money and optimism. Then rates rise, developers pull back, and supply tightens. That’s actually the first sign the market is nearing bottom: when developers stop building, future supply shrinks, setting the stage for recovery.
Interest rates, as history shows, have no upper limit. Central banks will keep raising until inflation bends. It’s the only effective medicine, no matter how bitter. And once inflation subsides, rates inevitably fall, fueling the next recovery. Real estate is cyclical because people’s need for housing never disappears, it just pauses.
Even when markets cool, buyers don’t vanish; they rent. They’re still paying for shelter, just helping someone else pay off a mortgage. And once confidence returns, many renters re-enter as buyers. That’s why each generation faces its own housing wave.
For the baby boomers, the first buying surge came in the late 70s when they got married and started families. Their second wave came in the mid 80s as they upgraded to larger homes. The following generation, those born in the 60s, hit their stride in the late 90s and early 2000s. The millennials, born in the 80s, saw their first major buying wave around 2015 and a second one near 2022. Each generation follows the same rhythm: first home, family upgrade.
The upcoming wave will come from millennials’ second homes and Gen Z’s first homes, roughly between 2030 and 2035. That’s when both generations’ needs overlap, just as previous upcycles have. Ultimately, every cycle teaches the same truth: housing demand never disappears, it only waits for conditions to realign. Whether you rent, buy, or build, you’re meeting the same basic need: a place to live, to grow, and to belong. The ones who act early, despite uncertainty, tend to shape the next cycle rather than be swept by it.