Canadian Home Prices Still Out of Reach for Many

Canada's housing market has seen a significant price correction, with benchmark home prices dropping by 21.3% from their peak in March 2022 to $661,800 in July, according to the Canadian Real Estate Association's home price index.

This decline is even more pronounced when adjusted for inflation, which ran hot for several years and has recently climbed back up to the top end of the Bank of Canada's target range of 1-3%. As a result, real house prices have fallen back to where they were in 2016, a drop of nearly 30% from their peak.

While this correction has helped improve housing affordability, it remains a concern. Doug Porter, chief economist at Bank of Montreal, notes that 'The glass remains half empty' when it comes to affordability.

The Bank of Canada's housing affordability index still sits above its long-run normal, indicating that there is limited room for further improvement in affordability without additional price drops or income growth.