After rising over the previous four months, the Teranet-National Bank composite index lost momentum in December, with prices remaining unchanged compared to November. This loss of steam comes at a time when the number of transactions in the resale market declined in November and December, despite the Bank of Canada’s policy rate cuts in the fall and the improvement in the labour market in the last months of the year. On an annual basis, the composite index fell 3.5% compared to December 2024, a larger contraction than the 2.8% recorded the previous month. However, the decline in prices was not observed everywhere in the country. In fact, improved affordability, due to more favourable fixed and variable interest rates and resilient household incomes, supported price growth in some regions. This was particularly true in Quebec and the Prairies, which are more affordable than the national average and experienced the highest annual price growth. Conversely, persistent affordability challenges in Ontario and British Columbia continue to weigh on prices in an increasingly unfavourable demographic context. Although a moderate recovery in resale market activity is anticipated in 2026, persistent market weakness in Ontario and British Columbia is expected to limit short-term price increases at the national level. Recent cuts in the Bank of Canada’s key interest rates have provided some relief, but 5-year mortgage rates could start to rise again in 2026 if our scenario of economic improvement materializes. Combined with population growth that is expected to moderate further, these factors could continue to weigh on the outlook for the residential market.