Stats Canada’s Q3 2024 report revealed the latest insights into how households fared in the year’s third quarter. The report highlights that the average net worth per household remained steady at just over $1 million in Q3. 

Household net worth is not evenly distributed across all wealth quintiles. The gap between the wealthiest (top 20%) and the least wealthy (bottom 40%) increased by 64.9% in Q2 2024, marking an annual increase of 0.4% from Q2 2023. 

Residential real estate declined 1.0% in Q3 as home values fell for the second consecutive quarter. However, residential real estate still accounted for 40.9% of a household’s total assets in Q3. Nearly ¾ % of household real estate is held by those aged 45 and older.

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Key Takeaways

• Household net worth increased by 1.7% in Q3, driven by financial asset appreciation. 
• Households that own a home account for over 90% of net worth. 
• Canadian households own approximately $5.06 in real estate for every dollar of disposable income. 

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The Power of Home Equity Highlighted

Residential real estate accounted for 40.9% of total household assets in Q3, making it a pillar of household wealth. However, the housing market recorded another quarter of weak activity, with the value of residential real estate falling 1.0%. Resale activity picked up in August and September and continued through the end of Q3 in October, likely due to falling interest rates. 

The value of household real estate as a proportion of disposable income is one indicator of housing affordability in Canada. In Q3, this ratio fell to 505.7%, the lowest point since the end of 2020. 

A high ratio relative to disposable income indicates that real estate accounts for a large part of household wealth in Canada and is a key asset for long-term financial security. For every dollar in after-tax income, a household owns approximately $5.06 in real estate. However, this can also indicate that home prices are rising faster than income levels, making homeownership less attainable. 

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, and the mortgage stress test adds to the challenges buyers face. These same concerns are driving many Canadians to enter the housing market now to avoid even higher borrowing costs and home prices in the future as our housing supply dwindles.

Mortgages Squeeze Household Budgets

Mortgage costs have increased in Canada, putting financial pressure on household budgets. At the end of Q3, the household debt service ratio, which measures payments on credit market debt as a proportion of household disposable income, decreased slightly to 14.72%. Debt payments grew much slower (0.2%) compared to the 2.0% increase in disposable income. 

Household financial liabilities, which consist primarily of mortgage and non-mortgage debt, increased 1.2% in Q3 to reach $36.9 billion. However, an increase in household disposable income is helping to alleviate some of the pressures tied to debt servicing. 

58% of consumers who responded to the Canadian Survey of Consumer Expectations indicated they would need a significant decrease (more than 200 basis points) in interest rates to consider purchasing a home in the next year.  

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 them 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 choose a mortgage solely based on its low rate without considering the impact of excessive penalties on 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 without 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.

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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