For the past few years, much of the conversation surrounding the Ontario real estate market has centred around one question:
When will we hit the bottom?
Buyers have wondered whether they should wait for prices to fall further. Sellers have wondered whether they should sell now or wait for prices to recover.
But there is another possibility that doesn’t get nearly as much attention.
What if the market doesn’t continue significantly downward, but doesn’t quickly go back up either?
Instead, we could enter what is commonly described as a sideways market, potentially at the lower end of the current price cycle.
And that could change the way both buyers and sellers should think about today’s market.
First, What Does “The Bottom” of the Market Mean?
Think of the real estate market like a hill.
Prices rise, reach a peak, decline and eventually reach a point where they stop falling. That lowest point in a particular market cycle is what people mean when they talk about “the bottom.”
The problem is that we don’t receive an announcement saying:
“Congratulations. Today is the bottom of the real estate market.”
We usually recognize a market bottom only after it has happened.
For example, prices might decline, stabilize for several months and then begin increasing. Looking backward at the data, we may eventually be able to identify where the bottom occurred.
That makes trying to perfectly “time the bottom” extremely difficult.
What does a bottom mean for buyers?
For buyers, purchasing close to the bottom can obviously be advantageous. Prices have already undergone much of their correction, and buyers may have greater negotiating power than they would have had during a rapidly appreciating market.
The potential disadvantage is uncertainty.
When prices have been declining, buyers may naturally worry that they’re purchasing too early. They may wonder, “What if prices fall another $50,000?”
Waiting may protect them from further declines, but it also creates the possibility that they wait too long and market conditions begin tightening again.
What does a bottom mean for sellers?
For sellers, the bottom is generally the most difficult portion of a market cycle from a pricing perspective.
A seller who could have sold for considerably more several years earlier may have difficulty accepting today’s market value.
But there is an important distinction between what a property was once worth and what it is worth in today’s market.
Buyers don’t generally pay based on yesterday’s value. They make decisions based on today’s comparable properties, today’s borrowing costs, today’s inventory and today’s economic conditions.
What Is a Real Estate Market “Peak”?
Now let’s go to the opposite end of the cycle.
A market peak is the highest point prices reach before the market begins moving downward.
At a peak, demand may be extremely strong, inventory may be limited and buyers may compete aggressively for available properties.
For sellers, this can be an excellent environment. Homes may sell quickly, negotiating power can favour the seller and strong competition can push prices upward.
For buyers, however, a peak can be difficult.
Buyers may face bidding competition, less negotiating power and rapidly increasing prices. There is also the risk of purchasing near the top of the cycle and subsequently watching the market value of the property decline.
Again, there’s a catch.
Just like a bottom, we usually don’t know we’re at the peak until after we’ve passed it.
So What Is a “Sideways” Real Estate Market?
This brings us to the possibility that I think is particularly interesting in today’s market.
Imagine a graph of home prices.
Instead of the line continuing downward…
And instead of suddenly turning upward…
the line starts travelling sideways.
Prices fluctuate, but within a relatively narrow range.
One month they may increase slightly. The next month they may decline. Different communities and property types may perform differently.
But when you step back and look at the bigger picture, there is no significant sustained movement upward or downward.
That’s a sideways market.
And A sideways market doesn’t necessarily have to happen in the middle of a housing cycle. It can occur after a correction, while prices remain near the lower end of that cycle.
Instead of:
Peak → Correction → Bottom → Rapid Recovery
we could potentially see:
Peak → Correction → Lower Prices → Prolonged Sideways Period → Eventual Recovery
That sideways portion could theoretically last months or even years.
Haven’t We Seen This Before?
Yes.
The 1990s provide an interesting historical example, particularly in the Toronto market.
Toronto experienced a significant housing correction following the late-1980s real estate boom. Historical housing data show that after the correction, prices did not immediately rebound to their previous highs.
Canada more broadly also experienced a lengthy period during the 1990s in which home prices were relatively stagnant.
That doesn’t mean today’s market will repeat the 1990s.
There are significant differences between the two periods, including mortgage lending standards, housing supply, population dynamics, economic conditions and the underlying causes of each housing cycle.
The lesson isn’t that “2026 is the 1990s all over again.”
It’s simply that history demonstrates another possibility:
A housing correction does not always have to be followed immediately by another housing boom.
Sometimes prices simply remain relatively stable for an extended period.
Are We Starting to See Signs of That Today?
There are some interesting signals in the current GTA market.
Prices remain below where they were a year ago, but recent month-to-month movement has been much flatter.
At the same time, fewer properties are entering the market compared with last year. If inventory continues tightening while buyer activity remains relatively stable, that could reduce some of the downward pressure on prices.
In other words, we could potentially reach a point where buyers aren’t willing or able to push prices substantially higher, but sellers aren’t willing or financially pressured enough to push prices substantially lower either.
Those opposing forces can create something resembling a stalemate.
And that’s where a sideways market can develop.
Is a Sideways Market Good or Bad for Buyers?
Potentially both.
The Pros
A stable market can give buyers something that was extremely difficult to find during rapidly appreciating markets: time.
Buyers may be able to compare properties, examine comparable sales, conduct appropriate due diligence and negotiate without constantly worrying that prices will be substantially higher a few months later.
If prices remain relatively flat, buyers who are financially prepared may have an opportunity to focus less on trying to time the market and more on finding the right property.
A prolonged sideways market could also allow household incomes to gradually catch up with housing prices, improving affordability even if nominal home prices don’t decline dramatically.
The Cons
The downside is that buyers waiting for another dramatic price decline could potentially wait for something that never arrives.
If prices simply fluctuate around their current levels for several years, waiting two or three years may not result in a substantially cheaper home.
There is also the question of inventory.
If fewer homeowners decide to sell because they don’t like current prices, buyers could eventually have fewer properties to choose from. Increased competition for a smaller pool of desirable homes could put upward pressure on prices again.
And, of course, mortgage rates matter.
A slightly cheaper home isn’t necessarily more affordable if borrowing costs increase.
What Does a Sideways Market Mean for Sellers?
Again, there are advantages and disadvantages.
The Pros
Stabilization could finally give sellers a more predictable environment.
One of the challenges of selling during a declining market is that yesterday’s comparable sale may already be higher than what buyers are willing to pay today.
In a sideways market, recent comparable sales may become more meaningful because prices aren’t changing as rapidly.
Sellers may also have less reason to fear that waiting a few weeks will automatically mean another significant drop in value.
The Cons
A sideways market isn’t the same thing as a seller’s market.
If prices stabilize at the lower end of the cycle, sellers who are waiting for their property to return quickly to its previous peak value could be waiting a long time.
This is particularly important for homeowners who purchased near the peak and have little equity.
And buyers can still be selective.
Properties that are overpriced, poorly presented or competing against better alternatives may continue to sit on the market.
Stable prices do not make unrealistic pricing work.
Who Could Benefit Most From a Sideways Market?
One group that may find this environment particularly interesting is the move-up buyer.
Suppose you’re selling a $900,000 home to purchase a $1.4 million home.
You might look at your current property and think:
“I could have gotten more for this house a few years ago.”
That’s probably true.
But the more important question is:
What happened to the price of the home you’re buying?
If both properties have declined by similar percentages, the dollar amount saved on the more expensive property can potentially be greater than the amount lost on the less expensive property you’re selling.
This is why homeowners who are simultaneously buying and selling need to look at the spread between the two properties, not simply the selling price of their existing home.
A sideways market may also work well for long-term buyers who have stable employment, appropriate financing and no intention of selling again in the immediate future.
It can be more challenging for short-term investors, highly leveraged buyers or sellers who require rapid price appreciation to make their numbers work.
What About Downsizers?
A sideways market can also provide opportunities for downsizers, although the calculation is different.
If someone owns a higher-value property with substantial equity and is moving into a less expensive property, the primary considerations may be the difference between the sale and purchase prices, lifestyle goals and what they intend to do with the remaining equity.
The decision doesn’t necessarily need to depend on whether the overall market increases next year.
Sometimes the right real estate decision has more to do with your stage of life than the stage of the market.
But There’s One Big Caveat
Everything I’ve just discussed is a market scenario, not a prediction or guarantee.
Real estate markets don’t operate in isolation.
Interest rates and mortgage costs can dramatically affect purchasing power.
Employment and economic growth affect consumer confidence.
Inflation affects household budgets and borrowing costs.
Immigration and population growth influence housing demand.
Housing construction and inventory influence supply.
Government housing and taxation policies can change incentives.
And national or international events can change the economic outlook surprisingly quickly.
Trade disputes and tariffs are a particularly relevant example today. They can affect Canadian businesses, employment, inflation, consumer confidence and ultimately interest-rate expectations.
A major economic downturn could put renewed downward pressure on housing.
Conversely, lower borrowing costs, stronger economic growth, improving consumer confidence or rapidly declining housing inventory could bring buyers back into the market and put upward pressure on prices.
The direction can change.
That’s why forecasts should be treated as possibilities rather than promises.
Maybe We’re Asking the Wrong Question
For years, buyers and sellers have been asking:
“When will the market bottom?”
Perhaps a better question is:
“What if we’re already approaching the lower end of the cycle and prices simply stay here for a while?”
For a buyer, that means considering whether waiting actually improves your financial position.
For a seller, it means deciding whether waiting for yesterday’s prices is compatible with your plans.
And for someone buying and selling at the same time, it means looking beyond the price of one property and considering the entire transaction.
No one knows with certainty what the housing market will do next.
The market could fall further.
It could begin appreciating again.
Or it could do something much less dramatic:
It could simply go sideways.
And sometimes a boring real estate market isn’t necessarily a bad real estate market.
It may simply be a market where success depends less on predicting what happens next and more on making a decision that makes sense for you today.
~Natacha Jamshidi, Realtor
This article is for general informational purposes only and is not intended as financial, legal or investment advice. Real estate conditions vary considerably by municipality, neighbourhood and property type. Market forecasts are not guarantees of future performance.