Real Estate

Canadians Household Net Worth Increases 3.3% Driven by Equity and Housing Markets

Canadians Household Net Worth Increases 3.3% Driven by Equity and Housing Markets

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    Stats Canada’s recent Q1 2024 report revealed the latest insights into how households fared in the year’s first quarter. The report also examines Canada’s housing market and housing supply challenges. 

    The report highlighted that household residential real estate values rose 2.6% in Q1, following consecutive declines in the second half of 2023. Sales activity increased 16% year-over-year. However, British Columbia (-1.1%) and Ontario (-0.8%) saw declines in home prices.


    Key Takeaways

    • Household net worth increased 3.3%, driven by equity and housing markets. 
    • Households that own a home account for over 90% of net worth. 
    • Interest payments on mortgages have doubled, reaching $25 billion. 

    We’re curious…

    Are you a first-time buyer?

    The Power of Home Equity Highlighted

    The housing market rebounded in Q1, with the value of residential real estate rising 2.6% year-over-year to $213 billion. For the first time since June 2023, the average resale home price surpassed $700,000. 

    In Q4 of 2023, households that own a home held over 90% of net worth. This emphasizes the long-term benefits of homeownership as a wealth-building strategy.

    Housing Supply a Continuous Problem

    There remains an imbalance between demand and supply, which puts pressure on housing prices, making it increasingly more difficult for individuals and families to enter the housing market and afford a home. The housing supply shortage has significant implications for first-time homebuyers (FTHB) and lower-income households. 

    Concerns have been raised about the future housing supply and its potential impact on affordability. The value of residential real estate may continue to rise despite higher interest rates. 

    Canada’s mortgage rates are straining homebuyers’ borrowing capacity, with the mortgage stress test adding to the challenges buyers face. These same concerns are driving many Canadians to enter the housing market now to avoid even higher rates in the future as our housing supply dwindles.

    Mortgages Squeeze Household Budgets

    Mortgage costs have been on the rise in Canada, putting financial pressure on household budgets. In Q1, households responded to increased interest rates by adjusting their preferences for investing toward fixed-term deposits (GICs) that earn higher interest.   

    Mortgage interest payments have doubled since the Bank of Canada started raising the policy interest rate, reaching $25 billion in Q1. Mortgage principal payments decreased to less than half of mortgage interest payments to $12.2 billion in Q1.

    Homebuyers must carefully assess their financial situation and consider the impact of higher interest rates on mortgage affordability. Homeowners need to clearly understand their financial situation and develop a budget that allows them to meet their future mortgage obligations while maintaining overall financial well-being. 

    Seeking professional advice and exploring different mortgage options can help mitigate the impact of rising mortgage costs on homebuyers. A knowledgeable mortgage expert can help prospective borrowers understand affordability, and help shop for the lowest rate available. 

    Although shopping for a low rate may be a priority for most homebuyers, it’s equally valuable to shop for the right mortgage. 

    What’s the right mortgage? The right mortgage is a borrowing solution that satisfies your current needs and mitigates future risks. Mortgage experts possess industry knowledge to highlight the features and benefits that may be most valuable for your financial situation.  

    For example:

    • If you solely choose a mortgage based on its low rate without considering the impact of excessive penalties of certain low-rate mortgages, you could be left with a hefty penalty if you or your family need to relocate for work.  By honestly discussing your situation with a mortgage expert, you could avoid considering solutions that don’t come with flexible options, such as portability or lower discharge penalty calculations.

    Frequently Asked Questions

    Welcome to our Frequently-Asked Questions (FAQ) section, where we answer the most popular questions designed and crafted by our in-house mortgage experts to help you make informed mortgage financing decisions.

    How can households manage their mortgage costs amidst high interest rates?

    Households can consider refinancing their mortgage to extend their amortization, make extra payments to reduce the principal faster and shop for the best mortgage rates and terms to manage mortgage costs. It is advisable to consult with a mortgage expert to determine the best course of action based on individual circumstances.

    Note: subprime and private mortgages offer longer amortizations, but they are typically suitable for borrowers looking for short-term solutions with an exit strategy.  It’s important to be wary of mortgage brokers who jump to these solutions before explaining why you can’t qualify on the prime lending side.

    What can be done to address the housing supply shortage?

    Addressing the housing supply shortage requires a multi-faceted approach. Policymakers can implement measures to incentivize the construction of new housing units, such as offering tax incentives, removing municipal policy roadblocks against increased housing density, or streamlining the regulatory process. 

    Additionally, investing in affordable housing initiatives and encouraging the development of rental properties can alleviate the strain on the housing market. Collaboration between government, industry stakeholders, and communities will be crucial to finding sustainable solutions to Canada’s housing supply issues.

    What should potential homebuyers consider in a tight housing market?

    In a tight housing market, potential homebuyers should be prepared to act quickly and make competitive offers. Before making an offer, it is essential to have a solid understanding of the local real estate market, set a realistic budget, and seek professional advice.

    Final Thoughts

    The Stats Canada report provides valuable insights into the ongoing challenges in housing supply and the impact of rising mortgage costs on household budgets. Homeownership continues to be a significant wealth-building strategy, with the appreciation of real estate values contributing to the accumulation of home equity. 

    However, the persistent housing supply shortage poses challenges for potential buyers and affordability concerns for existing homeowners. Rising mortgage costs further strain household budgets, burdening the economy and consumers, emphasizing the need for careful financial planning and shopping for the best rates possible. 

    Reach out to nesto’s mortgage experts to learn how much mortgage you can afford.


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