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Canadian real estate prices have shown an obscene amount of growth over the past year. Real home prices rose 0.8% in Q and are now 21.4% higher than the same quarter a year before. This is just under CREA’s estimate, but a little higher than the Teranet estimate.
If the U.S. housing market got as expensive as Canada’s housing market, the median home price would be closer to $656,000, with a range of between $612,000 – $700,000. From the chart above, the U.S. housing market looks perfectly normal. One could argue the data shows the U.S. housing market may actually be about 10% underpriced.
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Despite these factors, the US and Canadian housing market were both red hot in 2020 – and real estate experts anticipate comparable growth in 2021. We calculate prices for Canada and the United States as a population-weighted mean of 153 and 2202 cities, respectively. Since large cities tend to have a higher cost of living, it's better to visit specific city pages below for more relevant information. There is absolutely no reason for housing prices to increase in an area just because it is currently cheap relative to local incomes. Thanks for these posts comparing US housing values to other countries.
Cheap borrowing conditions also appear to have unleashed pent-up homeownership demand among the respective large cohort of millennials on both sides of the 49th parallel. In the U.S., the homeownership rate among 25 to 34 year-olds was around 40% at the onset of the pandemic, 7 percentage points lower than the average in the early 2000s. The sudden drop in mortgage rates helped more individuals in this cohort become homeowners for the first time. Indeed, the same Royal LePage survey reported that of the millennials who had said they were homeowners, 25% purchased their homes since March 15, 2020.
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The other factor has been the exchange rate between the US dollar and the loonie. Despite soaring at the height of the coronavirus pandemic, the US dollar has come back down to earth, and the loonie has stabilized in recent months. Today, there is about a 20-per-cent gap in the USD/CAD currency pair, so that needs to be considered when comparing affordability across national housing markets.
The impact of Canadian consumer choices is more difficult to measure, but Porter believes it could be the key to understanding the home price gap. Canada ranked 14th vs 6th for the United States in the list of the most expensive countries in the world. ⁵We cannot pin down the extent of speculative activity in Canada and the U.S. due to data limitations. Although, I think it’s important to invest for the long term.
Canadian Income Grew Similar To U.S. Incomes
The high demand for homes in the country is likely because Canada has a stronger homeownership culture than the US. The homeownership rate is 68.55% as of 2019, while the US has a rate of 65.4% in the third quarter of 2021. This shows that more Canadians are willing to own the place they live in compared to Americans. Middle class poverty is becoming a pandemic of its own in Canada.
Yeah, Canada is running out of land, that is why prices are so high. But if you are retiring, you can move anywhere to geo arbitrage. But I don’t know that many people looking to retire to Canada due to the weather. Richmond known to have high crimes but cheapest home and land compare to Oakland. Global Financial Integrity, a Washington D.C.-based anti-corruption organization believes a significant amount of illicit funds is laundered in Canadian real estate.
Canada Bans Foreign Home Buyers!
Having a large global pool of potential buyers mean you have a floor under prices, which makes real estate in those cities stable stores of value. Most of the problem is blamed on Illegal money flows from China, but immigration policy since 2015 has opened the door for more of this from Mexico and Iran. Canada went all in on housing and behaved in an increasingly risky fashion because GDP was reduced after oil prices fell and its part of the liberal party enhanced immigration platform.
Data run up to February, and the recent drop could be due to weather impacts. Going forward, we could see an increase in listings, but this would likely do little to bridge the gap with Canadian home sales. I own VNQ and a bunch of other real estate ETFs and REITS. I just know from wanting them for a long time that they can sometimes be even more volatile than stocks when the stock market corrects. I live in Ottawa, Canada and there is a small town right across the border called Ogdensburg, NY. The place has been depopulating since the 1930s and you can buy 5-plexes for $150k and SFH for $30k.
Walk on appearances by John Gerretsen, former Liberal Minister of Municipal Affairs and Housing; and Ontario Green Party Leader Mike Schreiner. Home prices in the Toronto region, which had been rising steadily since 2018, have cratered since then, as have new sales. Buyers who want to break their contracts risk losing their deposits. But if those buyers walk away, builders could also sue them in an effort to recover the difference between the original purchase price and the price they end up selling the home for. In a recent research note from BMO Economics titled “Unbreakable Canadian Housing?
Everywhere I look around me, people are rich beyond my wildest dreams and making millions off equity grants. Long story short, we are starting to come to the conclusion that we will never be able to afford the East Bay house we want, and maybe we should move elsewhere. The thought is I can aero-commute into SF for client and team meetings as needed. In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children, playing tennis, and writing. With the growth of work from home and solid demographic trends to lower cost areas of the country, CrowdStreet’s offerings are positioned very well.
The economist used $617,000 as the average Canadian home price as of December and $445,000 as the average US home price in his calculations. But in his note, Porter writes that Canadian home prices have become even more extreme in recent months when compared to prices in the US. ⁶The U.S. lending conditions series used in Chart 7 is whether credit standards on Government-Sponsored Enterprise eligible residential mortgages has tightened in the last three months. Looking ahead, Canadian housing dynamics could follow the U.S. given that America is further ahead in the vaccine rollout and reopening of the economy.
Existing mortgage rates would mean unaffordable payments, they say. Penelope Graham is the Managing Editor at Zoocasa, and has over a decade of experience covering real estate, mortgage, and personal finance topics. Her commentary on the housing market is frequently featured on both national and local media outlets including BNN Bloomberg, CBC, The Toronto Star, National Post, and The Huffington Post.
In recent quarters, financing conditions have been loosened significantly stateside so that there has been convergence. Still, easier access to mortgage financing through much of 2020 could have played a part in Canada's housing market outperformance. Home price and sales metrics show that while the U.S. market is hot, Canada's is hotter. For example, existing home sales, which make up the majority of overall sales in both countries, is well above historical averages in both countries, but Canadian home sales have outperformed .
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