Canada\u2019s house price correction has been painful for homeowners forced to watch their equity erode. As steep as the price drop has been, however, affordability has still not recovered to historic norms.<\/p>\n
In July, the benchmark home price across Canada stood at $661,800, a 21.3-per-cent decline from its peak in March, 2022, according to the Canadian Real Estate Association\u2019s home price index. <\/p>\n
The plunge is even more pronounced after factoring in inflation, which ran hot for several years and recently has climbed back up to the top end of the Bank of Canada\u2019s inflation target range of 1 to 3 per cent. Real house prices have fallen back to where they were in 2016, a drop of nearly 30 per cent from the peak.<\/p>\n
That\u2019s helped housing affordability recover from the worst period of deterioration since the 1990s, but as Doug Porter, chief economist at Bank of Montreal, wrote in a new note, \u201cThe glass remains half empty.\u201d<\/p>\n<\/p>\n
The Bank of Canada\u2019s housing affordability index, which tracks housing-related costs \u2013 in particular, mortgage payments and utility bills \u2013 relative to average household disposable incomes, still sits well above its long-run normal. <\/p>\n
There are a limited number of ways affordability can \u201cget back to normal,\u201d Mr. Porter wrote. The ideal path would be for Canadian incomes to push higher. Households have made gains on that front in recent years, but the process is slow. <\/p>\n
Affordability would also be restored if prices fell further. That\u2019s still happening in some markets, with regional real estate boards in Toronto and Vancouver reporting further annual declines for composite benchmark prices in August of 4.5 and 5.6 per cent, respectively, even as other markets like Montreal and Calgary look more stable. <\/p>\n
Lastly, the cost of borrowing money could come down further to help with affordability. Yet with a global run-up in bond yields, which influence fixed mortgage rates, and the Bank of Canada warning that inflation risks are mounting, interest rate relief \u201ccertainly does not seem to be in the cards,\u201d Mr. Porter wrote. If affordability is going to improve, \u201cthe burden still seems to be on prices.\u201d<\/p>\n
Decoder is a weekly feature that unpacks an important economic chart.<\/p>\n","protected":false},"excerpt":{"rendered":"Canada\u2019s house price correction has been painful for homeowners forced to watch their equity erode. As steep as…\n","protected":false},"author":2,"featured_media":891101,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,14537,46],"class_list":["post-891100","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-ca","tag-canada","tag-chartoftheday","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/891100","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=891100"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/891100\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/891101"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=891100"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=891100"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=891100"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}