Housing affordability improves across Canada in January

New report shows welcome trend

Housing affordability improves across Canada in January

Home affordability eased across Canada last month as the qualification requirements to purchase a property lowered in 13 markets, according to a new Ratehub.ca study.

Both home prices and mortgage rates softened in January, contributing to improved buying conditions across the country, with the income required to purchase a home dipping in each city included in the report.

Even in cities where home prices increased, a drop in interest rates was sufficient to offset those jumps.

The report, grounded in national real estate data spanning January 2024 and December 2023, shows the interplay between fluctuating mortgage rates, stress test parameters, and real estate valuations on the affordability landscape.

Softening mortgage rates have effectively nudged the stress test downward, alleviating the financial burden for aspiring homeowners. In January, the stress test rate descended to 7.71%, down from December’s 8.16%, based on an average mortgage rate of 5.71%.

Seven out of the 13 markets experienced a decline in home prices, amplifying the affordability quotient for potential buyers. Vancouver saw a $7,400 reduction in average home prices, translating to $9,620 less income required for home acquisition. Similarly, Toronto showcases improved affordability dynamics, with a $1,400 dip in average home prices, sparing potential buyers $7,800 in income requirements compared to December figures.

However, amidst the backdrop of these favourable developments, Ratehub noted that the warmth of January’s market activity hints at potential challenges ahead. Data from the Canadian Real Estate Association (CREA) paints a picture of heightened demand, with sales soaring by 22% year over year, marking the most significant annual gain since May 2021.

This surge in demand exacerbates existing supply constraints, tipping the scales back in favour of sellers. The sales-to-new-listings ratio stands at 58.8%, inching closer to the seller’s market threshold. While the average national home price demonstrates a 7.6% annual uptick, the monthly metrics hold steady, reflecting a cautious equilibrium.

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