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Despite Cooling Market - Home Affordability Continued To Erode In October, Hitting A National Increase of 5.29% In Income Needed.

Despite Cooling Market - Home Affordability Continued To Erode In October, Hitting A National Increase of 5.29% In Income Needed.
Written by
  • Ashley Howard
| Nov 21, 2023
Reviewed by
  • Samson Solomon
| Nov 30, 2023

Table of contents

    In October, to-be-borrowers continued to feel the impact of previous rate hikes, despite recent Bank of Canada pauses, a cooling market, and falling fixed rates. While the percentage of aggregate income needed is less impactful from last month’s report (where it increased about 10% annually), numbers were still on the upward trend from this time last year at about a 1.81% increase nationally. 

    This month’s CREA report highlights that sales are continuing to slow and will likely remain that way through the end of 2023, with a 5.6% decline in homes sold since last month. 

    “We’re only in November, but it appears many would-be home buyers have already gone into hibernation,” said Larry Cerqua, Chair of CREA.

    According to the latest report on November 15th, the following developments occurred:

    • The total transactions posted (not seasonally adjusted) were down 5.6% compared to September 2023. 
    • The national sales-to-new listings ratio eased to 49.5% — a 10-year low.
    • The number of newly listed properties declined by 2.3%, a noticeable difference from the 6.3% jump from last month. 

    “While seasonality is at play, there’s also a growing segment of would-be home buyers who are optimistic about falling home prices coupled with lower mortgage rates in the near future who are patiently waiting for their time to enter the market,” says Chase Belair, Co-Founder and Principal Broker of nesto, “I would caution anyone that is timing their decision on mortgage rates alone not to expect a return to the pre-pandemic, ultra-low rates that many Canadians had benefited from. While we may see rate cuts in 2024, there is no indication we will see rates below 4% in the foreseeable future.”

    Are you a first-time buyer?

    Home Affordability Continued To Worsen Year-Over-Year In October In All Provinces 

    Home Affordability Continued To Worsen Year-Over-Year In October In All Provinces 

    To better understand the impact, we turned to our proprietary data. 

    This month’s home affordability report highlights a second consecutive month where both income needed and home prices increased

    These results are two-fold:

    1. Last year in October, the housing market began slowly descending into what would become January’s historical trough. It makes sense, then, that as the market recovers, we note increases on the home price front. That’s logical.
    2. What’s less logical, and more uncontrollable, is the impact seen by Bank of Canada’s continuous increases through summer 2023. While we did have a reprieve with a pause in September and October, it’s undeniable that the work from BoC has left a lasting impression on income requirements for homes throughout core provinces.

     Here are some highlights from our data: 

    • Quebec saw average home prices increase 3.54% year-over-year to $468,300 (from $452,300 in 2022), with the income needed increasing to $101,861 from $94,697 in 2022.
    • Ontario logged an increase in average home prices, rising $5,400 to $879,300, with the income needed reaching $183,598 from $175,168 in 2022.
    • British Columbia noted a $30,500  increase in average home prices, which resulted in a $14,168 rise in income needed, bringing that number to $202,607 from $188,439 in 2022. 

    Calculations are based on a mortgage with a 25-year amortization, a 20% downpayment, provincially averaged property tax rate and includes $100 for monthly heating costs. Home prices are sourced from the most recent CREA report.

    Whereas income needed may have risen, some positive news is that this month, we logged 6 provinces where a borrower can own a home with under $100,000 salary.

    6 Provinces Where You Can Still Buy A Home Under $100,000 Salary In November 2023

    Newfoundland & Labrador: $62,507

    Saskatchewan: $72,454

    New Brunswick: $74,298

    Prince Edward Island: $83,335

    Nova Scotia: $85,917

    Manitoba: $93,142

    4 Provinces Where You Need Over A $100,000 Salary To Buy A Home In November 2023

    British Columbia: $202,607

    Ontario: $183,598

    Alberta: $103,248

    Quebec: $101,861

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    Final Thoughts & Predictions for Next Month:

    It’s not unusual to see a cooler market as we head into the holiday season; however, it is worth noting that even with less competition and rate hikes, there are still fewer opportunities to enter the housing market with income needed increases. We expect a similar storyline to continue through Q1, and have hopes by Q2 of 2024, some much-needed rate cuts will occur.

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