Myth vs. Math: Why Claims of a Housing Market Return to Peak Levels are Overstated

The Canadian housing market is saturated with optimistic chatter. With signs of interest rates stabilizing or even easing, the popular narrative is that a massive amount of "pent-up demand" is about to flood the system, sending prices back to the frenzied, record-setting peaks of 2021.

However, for everyone from first-time homebuyers to seasoned real estate investors and property managers, it’s time to move past the hype. A close look at the economic reality—both nationally and right here in the Hamilton, Ontario area—reveals that the market is stuck, not by indecision, but by a significant and stubborn affordability barrier.

The Myth of the Massive Waiting Crowd

The theory of "pent-up demand" is based on a simple assumption: that the low sales volumes of the last few years have created a huge backlog of buyers who are financially ready to transact.

To test this, we analyzed sales activity over an 11-year period against recent performance in a major regional market. The numbers revealed a nominal sales deficit—the gap between expected transactions and actual transactions—that is surprisingly small.

• The Size of the Deficit: The quantified sales shortfall is minor when compared to the massive volumes recorded during the boom years.

• The Reality: Even if every single transaction missed over the slow period were to happen immediately, the sales volume would still be far below the peaks of 2021. The market lacks the volume required for a true "explosion."

This suggests that the market's slowdown wasn't just caused by buyers waiting on the sidelines; it was caused by buyers being forced out of the market altogether due to high costs.

The Economic Wall: Affordability Over Desire

At its core, the most significant obstacle preventing a return to peak-level demand is the affordability crisis. Market demand is not a measure of desire; it is a measure of economic ability.

Effective demand is dictated by the relationship between three key factors: home price, the cost of borrowing (interest rates), and income.

• High Costs vs. High Rates: Despite small rate adjustments, the total cost of ownership—a combination of still-high home prices and elevated mortgage rates—remains structurally higher than it was during the period used to calculate historical averages. This means the monthly payment required to service a mortgage is prohibitively expensive for most households.

• The Lagging Income: While wages have seen some growth, median incomes have not kept pace with the dramatic rise in home prices and borrowing costs. Housing affordability indices consistently show that Canadian households must dedicate a disproportionate and unsustainable percentage of their income to housing costs.

Simply put, you cannot recreate peak demand conditions without replicating peak affordability. Since affordability remains severely strained, the theoretical demand is locked away behind an economic wall.

Local Trends: Hamilton Finds Its Balance

Our local Hamilton, Ontario market perfectly illustrates this national trend of stabilization, not acceleration. The market is shifting toward balance, offering a clearer, less volatile environment than in previous years.

• Average Prices Soften: The average residential sale price in Hamilton in September 2025 was approximately $775,745, reflecting a decline of roughly 5% compared to the previous year. This indicates that prices are correcting, not exploding.

• Inventory Rises: The number of homes for sale (new listings and active listings) has increased, giving buyers more options and more negotiating power. The shift to a more balanced market means sellers face increased competition and must price strategically.

• Sales Activity is Moderate: While sales activity has seen recent month-over-month improvements, it remains well below long-term historical averages. Buyers are cautiously re-entering the market, but there is no frantic race.

The multi-family and mixed-use segments we deal with are impacted by these same dynamics. While demand for rental units remains high, the pace of rent increases is moderating, and investors must approach new acquisitions with realistic income projections.

The overall consensus, therefore, is one of gradual recovery, not sudden price surges. This environment rewards cautious strategy, careful financial planning, and professional advice.

Navigate Your Next Move

Whether you are looking to purchase a multi-family building, invest in a commercial unit, or secure a property manager for your assets, having accurate information is your most valuable tool.

For expert guidance, property management services, or assistance with buying, selling, or leasing commercial units, contact Red Maple Property Management.

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