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Home Affordability Continued To Erode In September, Hitting A National Increase of 9.78% In Income Needed.

Home Affordability Continued To Erode In September, Hitting A National Increase of 9.78% In Income Needed.
Written by
  • Ashley Howard
| Oct 24, 2023
Reviewed, Oct 27, 2023

Table of contents

    One thing is for sure – In September, borrowers felt the prior July 12th Bank of Canada hike. This is noted by the increased annual income needed of nearly 10.0% across Canada from 2022 to 2023.

    This month’s CREA report highlights the impact of the July 12th Bank of Canada rate increase of 0.25%. While signals point to a steadying, more balanced housing market by the end of the year, it’s indisputable that borrowing challenges have worsened. 

    According to the latest CREA report on October 13th, the following developments occurred:

    • Homes sold were down 1.9% from last month. Which is usually expected in the late summer months.
    • The total transactions posted (not seasonally adjusted) were up 1.9% compared to September 2022. 
    • The number of newly listed properties jumped 6.3% from last month. 
    • Declines were seen in the Greater Vancouver and Greater Toronto Area (GTA), offsetting gains in Edmonton, Montreal, and the Kitchener-Waterloo region. 

    “The recent trend of slowing sales and rising new listings continued in September,” said Larry Cerqua, Chair of CREA. “This presents an opportunity for buyers, although many of them seem content to stick to the sidelines until there’s more evidence that interest rates are indeed finally at the top. This, combined with sellers who, by and large, do not need to sell, means the market will likely remain on the slower side until next year. That said, there are still tens of thousands of deals going on every month, and if you’re looking for information and guidance about how to buy or sell a property in the current market, contact a REALTOR® in your area,” continued Cerqua.

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

    To better understand the impact, we turned to our proprietary data. Looking at our set of numbers,  it is clear that the housing market was negatively impacted by the latest Bank of Canada rate hike on July 12. It increased the prime rate to 7.20%, and the lender’s best 5-year fixed today stands at 5.49% compared to 4.39% in September 2022. 

    In past months, there was at least one or two provinces where income needed fell; however, just like in August, September saw an increase in income needed across all 10 provinces.

    This month’s home affordability report highlights a significant observation worth noting. In contrast to past months, where home prices may have decreased, but the required income still skyrocketed due to rising interest rates, the current scenario depicts a situation where home prices have risen simultaneously with rates.

    This makes it all the more notable for those thinking and able to buy to start planning now. Especially if things continue to head into a buyer’s market by the end of the year. 

     Here are some highlights from our data: 

    Quebec saw average home prices increase 2.63% year-over-year to $468,900, with the income needed increasing to $103,072 from $92,892 in 2022.

    Ontario logged an increase in average home prices, rising $10,800 to $896,500, with the income needed reaching $189,202 from $172,187 in 2022.

    British Columbia noted a $ 25,700 increase in average home prices, which resulted in a $21,338 rise in income needed, bringing that number to $206,234 from $184,896 in 2022.

    *Data is based on a mortgage with a 25-year amortization, a 20% down payment, and includes $100 for monthly heating costs.
    **Home prices sourced from CREA Report

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

    Newfoundland & Labrador: $63,800

    Saskatchewan: $73,361

    New Brunswick: $74,853

    Prince Edward Island: $84,422

    Nova Scotia: $85,911

    Manitoba: $95,777

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

    British Columbia: $206,234

    Ontario: $189,202

    Alberta: $104,246

    Quebec: $103,072

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    Final Thoughts & Predictions for Next Month:

    While it’s great to see CREA report a balanced market for the 3rd month, the real thing we look forward to is a drop in interest rates. Yet, it seems unlikely that will happen in 2023. As we look to November 2023’s report, we expect a similar pattern to appear – Home prices will likely continue to rise with market recovery. Still, with higher rates, income affordability will be brought into question.

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