The Canada Mortgage and Housing Corporation (CMHC) announced its new Housing Affordability Composite Index yesterday. The CMHC has designed the index to track and follow affordability for home ownership and the rental market and often overlooked areas for most affordability indices. The first reading shows that affordability has improved in recent years, but challenges persist, which are weighing on buying decisions. The CMHC said that affordability challenges began as far back as the early 2000s.

• CMHC says that homeownership affordability dropped to its lowest level since the 1990s in 2022. Amid the COVID-19 pandemic, interest rates dropped, pushing mortgage rates to ultra-low levels.
• Low mortgage rates and labour market mobility set the stage for demand to significantly outpace supply, putting upward pressure on prices. This was evident in cities across the country, not only in Toronto and Vancouver, which are Canada’s largest real estate markets.
• Since the lows in 2022, homeownership affordability has improved but remains at low levels historically.
• Getting more homes built has been a major initiative for the Canadian federal government. However, supply remains relatively tepid. The current economic environment, which has pushed up costs and heightened uncertainty, has resulted in fewer housing starts in recent months.
• In the rental market, affordability challenges are not as severe. High inflation and a rise in immigration pushed affordability concerns higher in recent years.

While trade tensions and economic uncertainty had a significant impact on Canada’s real estate market in 2025, there has been a prolonged period of affordability challenges, which has weighed on market activity. Raising the supply of homes could help alleviate some of the affordability challenges. Buyers may not get much more immediate help from the Bank of Canada, which is expected to hold its policy interest rate steady at its upcoming meeting in March.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.