Report: Canada's Housing Market Won't Rebound Until 2024
Sales slump to continue as prices, which exceed 60% of monthly incomes, keep falling.
TD Economics has revised its forecast for Canada’s housing market to account for steeper sales and price declines in 2023, followed by a rebound in 2024.
Home prices in Canada, which have dropped 22% since record highs in February, will drop by another 11% in 2023 while sales will decline by 16% next year, the bank forecasts.
TD predict that housing sales will bottom out at about 20% below their pre-pandemic levels in the early part of 2023 due to rising interest rates that along with astronomical prices have made home-buying unaffordable for most Canadians.
TD is projecting a strong rebound for Canada’s housing market in 2024. The bank expects home sales to jump by more than 19% in 2024 and prices to increase by 6%.
The affordability crunch is squeezing Canadians much worse than it is in the US because the average home price in Canada remains significantly higher than the current US median price of about $390,000.
In US dollars, the median price of a home in Canada peaked in February at a record $604,000, before dropping down to about $472,000. The exchange rate for the Canadian dollar is about $0.74.
The affordability index in Canada—using the standard metric that monthly housing expenses should not exceed 30% of monthly income—also is much more challenging up north.
According to a recent report from the Royal Bank of Canada, the cost of the average house in Canada is 67% higher than what the average household can afford. The report said that the median household would need to spend 60% of its income on home ownership costs.
With interest rates rising, a report from Desjardins forecasts that housing affordability in Canada will continue to deteriorate for another three to six months.
Canada’s central bank has raised its key interest rate by 300 bps since March, an even large hike than those enacted by the Fed in the US.
Desjardins’ Affordability Index projects that Edmonton and Calgary will return to pre-pandemic affordability levels by late 2024, but Toronto, Montreal and Vancouver will take longer to get there because these cities experienced the largest price surges in housing.
According to the Canadian Real Estate Association, home prices averaged more than $800K in Toronto and Vancouver in September.