Q2 2024 Housing Market Index Reveals Declining Builder Sentiment

National Overview

The Canadian Home Builders’ Association’s (CHBA) 2024 Q2 Housing Market Index (HMI) indicates a further decline in builder sentiment across key regions of Canada. This negative outlook suggests that housing starts, particularly for homeownership, are unlikely to increase significantly in the near future.

Provincial Concerns

Ontario and British Columbia, provinces facing the most severe affordability challenges and highest demand for increased housing supply, recorded record low HMI scores. This is particularly alarming given these regions’ critical need for expanded housing options.

HMI Scores and Implications

The single-family HMI scored 29.9 out of 100, while the multi-family HMI reached 32.5. Both figures represent significant decreases from the previous quarter and year-over-year comparisons. These low scores, especially in Ontario and British Columbia, point to potential severe drops in future housing starts and a worsening supply deficit.

Factors Contributing to Canada’s Housing Market Challenges:

Mortgage Qualification Issues

Nearly half of HMI respondents reported building fewer units due to customers’ difficulties in qualifying for mortgages. Furthermore, 22% of builders have had to cancel projects due to lack of sales.

Regulatory and Economic Barriers

High development taxes, restrictive municipal processes, and substantial housing supply deficits in larger urban centers contribute to inflated house prices. These factors, combined with stringent mortgage rules, create significant barriers for potential buyers.

Proposed Solutions and Industry Perspective

Mortgage Rule Adjustments

While the recent introduction of 30-year amortizations on insured mortgages for first-time buyers of new construction homes is a positive step, industry leaders argue that more comprehensive changes are needed. Suggestions include expanding 30-year amortizations to all insured mortgages for new construction and revising the mortgage stress test.

Collaborative Approach

CHBA CEO Kevin Lee emphasizes the need for action at all levels of government to address the housing supply and affordability crisis from multiple angles.

Conclusion

The Canadian housing market continues to face significant challenges despite initial interest rate reductions. The persistently low HMI scores, particularly in key provinces like Ontario and British Columbia, indicate a potential worsening of the housing supply deficit. To address these issues, industry experts call for a combination of mortgage rule adjustments, reduced development taxes, and streamlined municipal processes. Without comprehensive policy changes and collaborative efforts from all levels of government, the chronic undersupply of homes is likely to persist, potentially leading to further increases in house prices and exacerbating affordability issues for Canadian homebuyers.