Canadian Home Prices Still a Long Way From Affordable

The Bank of Canada's Housing Affordability Index shows that Canadian home prices continue to improve, but remain far from affordable. In Q2 2026, the index fell by 0.8 percentage points to 41.3%, marking an 11th straight quarter of improvement.

Despite this, housing remains unaffordable for most households, with more than two-fifths of income required for mortgage and utility payments. This is still worse than pre-2020 levels, which saw a reading of 36.4% in Q4 2019.

BMO Capital Markets' chief economist Douglas Porter warns that real estate remains rocky due to affordability issues. He notes that the improvements are largely driven by falling prices, lower rates, and rising incomes, but that it's still a long way back to 'affordable'.

Porter sees only one way forward for the market: further price declines or interest rate cuts. However, with the Bank of Canada's hawkish stance on interest rates, this seems unlikely in the near future.