RBC's Repeated Bottom Calls: What It Means for the Canadian Housing Market

RBC has made headlines yet again, asserting that Canada’s real estate market has reached a bottom for the eighth time in four years. This forecast emerged from the bank's August housing update, igniting a flurry of reactions across social media. However, it’s difficult to discern the rationale behind their newfound optimism, given their history of premature declarations since just after the market peak.

RBC Declares Market Bottom—Once More

In its latest analysis, RBC pointed to a seasonal uptick in home sales as a signal for a cyclical turn. "It increasingly appears that home values have already hit their cyclical bottom," the bank noted, citing a recent month-over-month rise in the national aggregate MLS Home Price Index. This marks a notable increase, something not observed since early 2024.

Yet, it’s critical to note that unadjusted home prices recorded declines for two consecutive months and year-over-year sales remain lower. Seasonal adjustments typically focus on removing regular fluctuations in data, but this method can obscure real market conditions. Such adjustments are rarely employed for asset prices, as it strays from the efficient market theory which posits that prices reflect all known information. If prices drop predictively, market participants will adjust their strategies to account for that, negating any benefits of adjustment.

Nevertheless, RBC claims that it sees a bottom, albeit with caution. "The market's recent winning streak is encouraging, but the reality is it’s still generally soft. The recovery will be incremental, to say the least,” economists at RBC acknowledged. So, while they are predicting a bottom, they simultaneously convey a tense landscape of slow recovery.

A Pattern of Predictive Bottoms

Many may be unaware of the frequency with which RBC has identified market bottoms. Since the initial peak, this has almost become a standard procedure for the bank. The cycle began just months after the peak of the market, even before interest rates had reached their apex.

RBC predicted that a “cyclical bottom is approaching—likely in early 2023,” around a mere nine months after prices had peaked. They forecasted one of the quickest corrections in history without fully considering factors like interest rates and credit availability, leading to skepticism about their accuracy. History has shown that these predictions did not materialize.

Early 2023: Delayed Recovery Acknowledged

As 2023 commenced, RBC altered its outlook, suggesting that the housing market correction was still underway but easing. "We think activity will hit bottom sometime this spring," the bank speculated in March 2023. However, the impact of rising interest rates, which typically takes between 18 and 24 months to influence market dynamics, was curiously downplayed. As spring arrived, RBC shifted its warning towards an impending supply shortage crisis, contrasting with their previous bottom predictions.

By the end of that year, RBC recognized that the anticipated recovery was stalling, predicting that "sluggish activity would linger into 2024." They anticipated a recovery only by the third quarter of the following year.

Forecast Readjustments Throughout 2024

By February 2024, RBC noted early signs of a potential upswing, moving its bottom prediction forward to that spring and suggesting prices would stabilize and gradually rise during the latter half of 2024. Nonetheless, challenges persisted, and as the seasons changed, so too did the bank’s forecasts, leading to further delays in anticipated recovery timelines.

In December, RBC claimed that lower rates were reviving the market's momentum, but those projections faltered by mid-2025, a period marked by unanticipated market lethargy.

Continued Optimism Amid Adversity

As 2025 unfolded, RBC maintained hope for a market recovery driven by eventual interest rate cuts, which they believed would reignite buyer demand. However, mid-year reflections saw a stark contrast where conditions had sharply deteriorated. This resulted in RBC’s persistent assertions of a market bottom, now prophesizing that a rebound would manifest in early 2026.

Outlook for 2026 and Beyond

Yet, as early 2026 approached, RBC's predictions faced new difficulties. A sharp decline in the Vancouver market brought renewed doubts about their optimistic projections. Nevertheless, a streak of seasonal increases led to yet another declaration of a market bottom in August 2026.

Price Trends Reveal a Stark Reality

While RBC has been assertive about a market bottom, it’s crucial to recognize the disconnect with broader market realities. Many provinces in Canada exhibit home prices near historic highs. A deeper dive reveals that since March 2022, the price of a typical home has decreased by just 21.3% nationally, with Ontario reporting a drop of 25.5%. Other areas, however, show little to no price correction, remaining close to all-time highs.

The bank believes that this recovery delay correlates with affordability issues, yet contradicts a narrative that many provinces are near record prices. The question arises: if a bottom exists while a sizable portion of the population is priced out of the housing market, who exactly is driving this activity?

Recent trends show taxpayers absorbing costs through substantial loans designed to assist organizations in acquiring homes, temporarily boosting demand but failing to address the underlying market dysfunction. Critically, mortgage rate cuts exacerbate affordability issues, as highlighted by Bank of Canada studies.

Forecasting the real estate market is inherently complex. Often, predictions must evolve with market developments—something these consistent bottom calls wink at. It seems RBC’s optimism continues to tread an uncertain path, as history indicates that such forecasts require grounding in a more nuanced understanding of buyer capabilities and actual market conditions. This raises the question of whether their methodologies truly align with the realities that homebuyers face across Canada.