With more urban markets to choose from and a wider range of downpayment assistance programs, the US may have the edge for first-time buyers – but Canada’s market has its benefits, too
The woes of first-time homebuyers across Canada have been well documented in recent years, with eyewatering home prices pushing affordability well out of reach for new entrants to the market and rent growth weighing against their ability to save for a downpayment.
That’s hardly a phenomenon unique to Canadians – but while the US has witnessed its fair share of challenges for those hoping to purchase for the first time, Canadians might look across the southern border with envy at some of the programs on offer for new buyers, according to a mortgage executive with experience in both markets.
Tristan Kirk (pictured top), principal broker and managing partner at Citadel Mortgages, told Canadian Mortgage Professional that Canada’s mortgage market would benefit from more downpayment assistance programs like those available in the US, where many buyers are able to tap into state and lender offerings requiring a much smaller downpayment than here.
“Borrowers [in the US] can buy with as little as 1% down, or even 0% down, and have their closing costs covered. And I think in Canada, we should have the ability – if you’re a Canadian citizen and making X amount of money per year and in good financial health – to offer these downpayment assistance programs to get Canadian homes,” he said.
“I don’t know how home affordability is going to continue to grow in Canada unless we start looking at stuff like that. And I think the States is well ahead of us in that market.”
Bleak affordability picture faces Canadians in major markets
Real housing prices in Canada have skyrocketed in the 21st century, far outstripping growth in the US, with prices as a percentage of disposable income also surging even while remaining relatively steady in the States.
Those prices are especially bloated in Canada’s main urban centres. In 2021, Oxford Economics ranked Vancouver and Toronto as the least affordable housing markets in North America, while Hamilton was deemed less affordable than US metropoles including Los Angeles, Seattle, New York, and Miami.
Kirk pointed out the stark contrast between some urban US markets and Canadian counterparts, and the lack of variety on offer north of the border. In Houston, Texas, the average home price came in at US$320,179 (just over $458,000 in Canadian dollars) in December 2024 – a far cry from the outlook in markets like Toronto and Vancouver.
“I think affordability is a huge thing when you look at 20% down or 5% down [in Canada] compared with 3.5% down on a $350,000 house,” he said. “That’s a lot different. I don’t know where you go for under $1 million anymore in Ontario.
“And then you add in the downpayment assistance programs and you’re getting people in the US buying with 1%, nothing down. And that was the first-time homebuyers. So it’s a huge market down there – there’s a lot of business.”
The US market is facing its own challenges, though – and the growing prominence of hedge funds is putting the squeeze on Houston buyers.
Houston’s housing market faces challenges as hedge funds buy up affordable homes, making it tough for first-time buyers, says Dan Monson from Sente Mortgage. https://t.co/ZDRZ8f9C1g
— Mortgage Professional America Magazine (@MPAMagazineUS) January 23, 2025
Drawbacks in the US mortgage market compared with Canada
Another important caveat: Canada’s mortgage market is generally viewed as more stable than its US equivalent, and avoided the meltdown witnessed across the border during the 2008 financial crisis.
Its more conservative approach to lending typified by generally higher downpayment requirements and stress testing rules differs sharply from the US approach, where Kirk said mortgage products can also often seem opaque and difficult for borrowers to understand.
“When you look at some of the US products and their adjustable mortgages and the options there – caps and balloon payments – I think that can be very confusing to borrowers,” he said. “It becomes a much more daunting task for a client to understand – whereas in Canada, you have an adjustable-rate mortgage, a variable mortgage whose payment or rate goes up and down with the Bank of Canada rates and you know what you’re doing.
“I think that in the States, you could probably take a program like that and just eliminate some options, making it more streamlined and less confusing for some clients.”
But the US has the edge when it comes to the term types offered to clients, according to Kirk. There, borrowers are generally able to take a fixed mortgage rate for the duration of the term, while in Canada homeowners usually renew at least once every five years.
“I think it’s better from a client and homeowner’s perspective in the US,” he said. “If you have a 30-year term and a 30-year amortization, and your rate is consistent throughout that and there’s no fees to break your mortgage and you can refinance that mortgage at any time, I think that’s a big win.”
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