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It’s been a bumpy year for the Canadian housing market, as sales and prices continue to drop on a year-over-year basis. The current slump is particularly noticeable, given the market’s red hot performance in the spring of 2017.

So why have things cooled off? In the past year, major changes have dramatically affected the market, leading industry commentators to warn that it could be months (and possibly years) before things begin to heat up again.

Here are three reasons why Canadian home prices have been flat in 2018:

Mortgage Stress Test
On Jan. 1, a mortgage stress test for uninsured buyers was introduced, severely limiting the purchasing power of many would-be homeowners. Home sales immediately dropped, while prices cooled significantly, and the market has yet to fully adjust to the change.

“We held the view until now that the transitory effect of the stress test implemented on Jan. 1 would start to wane by the spring,” said Royal Bank of Canada (RBC) Senior Economist Robert Hogue in a statement. “Well, there was no indication of any material rebound…through May.”

Rising Interest Rates
On top of the stress test, the Bank of Canada hiked the overnight rate 25 basis points to 1.25 per cent in January, and is widely predicted to do so again before the end of the year. The rising interest rate environment has led to higher mortgage payments for many homeowners, and contributed to the cooling of the market.

“An early-year slowdown in Canadian housing market activity persists in the wake of rising interest rates,” said Scotiabank Senior Economist Marc Desormeau in a statement.

Slump of Activity
Of course, the strength of the housing market is largely based on the psychology of homebuyers and sellers, and all signs indicate that many are waiting out the current cooling period before jumping back into the fray. Listings remain low in Canada’s major markets, as sellers wait for higher prices before listing their properties.

While others wait it out, this could be a good opportunity for buyers and sellers who want to participate in a market with less competition.

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