Residential Market Commentary - Affordability: Improving or not?

Canada Mortgage and Housing Corporation’s latest Housing Market Outlook says home affordability is improving… in some markets.  But the agency does not seem to view these uneven improvements as the big problem. 

While CMHC touts better affordability it says “uncertainty, mortgage rates and slow income growth are keeping many buyers on the sidelines.” 

CMHC’s summer outlook is forecasting falling prices, slowing sales and reduced construction through the rest of 2026.  The agency expects to see increasing housing market activity through 2027 and 2028 as Canada’s economic growth improves, but levels will remain below long-term averages. 

CMHC says one of the most important “knock-on” effects of the soft market will be reduced construction.  Low demand and high costs will see builders pulling back.  Housing starts fell again in June and CMHC is forecasting an annual decline of 6.8% compared to last year. 

Despite falling prices in many parts of the country, one of Canada’s major rate comparison websites says affordability has actually deteriorated.  Analysts say the benefits of lower prices have been over ridden by rising fixed-rate mortgage costs in 11 of the country’s 13 biggest markets. 

Fixed mortgage rates are tied to the yield on Government of Canada bonds.  Those government bond yields have been climbing due to on-going international turmoil such as the war in Iran, and erratic U.S. trade policy.