Vancouver: Low season
Vancouver, Canada's most expensive housing market, has seen home prices drop over the summer months, as sales remain down compared to last year. According to Greater Vancouver Realtors, transactions were down 17.1% compared to last year, about 10% below their seasonal average. The average home price in the county dropped $1,800 from July, to $1,195,900. That gives borrowers more breathing room, requiring them to get $2,680 less than last month, at $224,000.
Canadian cities where affordability was worst
While lower mortgage rates eased buying conditions across the country, there was a catch. This is where affordability worsened or improved slightly.
St John's: Down for second month in a row
The east coast has been the best in terms of activity this summer, as sales have been brisk. This is largely due to better overall affordability; with median prices below the $500,000-mark, buyers in these regions are less affected than the rest of Canada by higher borrowing costs and stress tests. Home prices rose $4,900 month over month to an average of $354,600. That means a home buyer there would have to earn $160 more, at $76,880, to qualify for a standard mortgage. This is the only market out of 13 where the income requirement has increased.
Regina: A little, but she's over the season
Saskatchewan's housing market remains strong, even as higher borrowing costs have dampened activity in other major markets. “Unlike many other parts of the country, sales in our province continue to be above the historical average for the fourteenth month in a row,” said Saskatchewan Realtors Association CEO, Chris Guérette. “Saskatchewan's relative affordability, when coupled with employment gains and declining unemployment rates, continues to support strong housing demand in our province.” That lowered home prices slightly in Regina, with an average increase of $1,300 a month to $319,700. That was still offset by lower mortgage rates, however, with income being reduced by $400 to $70,780.
Montreal: Continued sales growth
Recent price reductions have been effective in driving the growth of the Montreal market, keeping a firm floor below home prices. The Quebec Professional Association of Real Estate Brokers (APICQ) reports that sales increased by 9% annually in August. The board also points out that while Montreal's incomes are similar to other major Canadian cities, buyers have more “maneuvering room” to buy real estate due to lower home prices. This increase in activity pushed the median price up $2,600 from July, to $533,100. However, lower mortgage rates mean buyers need to earn $620 less than last month, at $108,550.
How much money can you pay? How much house can you buy?
The data above shows how mortgage conditions can change every month, as well as the income needed to buy a home. If you are currently mortgaged and buying a mortgage, you can calculate your affordability with our Mortgage Calculator, which personalizes results based on your income, current debt and debt obligations, and overall credit ratings.
Will housing affordability continue to improve for Canadians?
There is one thing analysts can agree on, that more interest rate cuts are coming. While the above survey takes the first two cuts from the BoC, another was initiated on September 4, which made borrowing costs fall by 75 basis points. At least two more cuts are widely expected from the BoC this year, and possibly up to six by 2025. Also, the US Federal Reserve (the central bank of America) is now on the cutting edge, bringing the 50-base basis. -a point drop from their latest rate announcement on September 18. Another half-point in cuts is expected this year, followed by another 1.5% by the end of 2026.
If the wildest expectations happen, Canadians could see the average borrowing rate drop to 2.75% by 2025. That will lower variable mortgage rates, and affect the bond markets, which in turn will affect the price of the mortgage rate (lowest five). The annual mortgage rate in Canada is currently 3.99%, see table below). New homebuyer policies introduced this month, which lower down payment and deduction limits for first-time homebuyers, should also help move the dial on buying. Although rising home prices may outpace gains, once the market shakes off its summer slumber.
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