Housing Market Index

• The single-family Housing Market Index recorded 27.4 in the third quarter of 2024. This is 2.5 points lower than the previous quarter and 6.5 points lower than in Q3 of 2023. The single-family HMI has retrenched to just 1.2 points above its record low of 26.2 recorded in Q4 2022.
• Over 55% of single-family builders rated current selling conditions as Poor. This majority pushed down the present selling conditions sub-index to just 1.1 points above its all-time low recorded in Q4 2024.
• 58% of builders believe that selling conditions over the next six months will be Fair, while 25% still feel conditions will be Poor.
• 65% of single-family builders rated traffic through sales offices and general inquiries were Low or Very low. Furthermore, only one builder in the entire sample rated traffic conditions as High or Very High.
• The US NAHB Single-Family HMI for the third quarter averaged 40. The sentiment score in both Canada and the US has trended down by about 8 points since the first quarter of 2024. Yet Canadian builders have maintained a more pessimistic view going back to mid-2022.
• Regionally, single-family HMI in British Columbia edged down from 17.8 in Q2 2024 to 17.1, reaching a new record low for the second consecutive quarter. The HMI for Ontario builders remains terrible at 14.3 (up marginally from its its record low of 11.6 in Q2 2024) —still indicating abysmal sentiment on sales conditions. Meanwhile, sentiment in the Prairie and Atlantic provinces fell from their marginally optimistic readings to marginally pessimistic readings in the mid-40s.

• The CHBA Single-Family Housing Market Index (HMI) continued to reflect builders’ broadly pessimistic views on new home selling conditions, registering a score of 29.9 in the second quarter of 2024. This score is 5 points lower than in the first quarter of 2024 and 10 points lower than in same quarter of 2023. This latest reading is close to the record low of 24.6, in the fourth quarter of 2023. By comparison, the record high was at 89.4 in Q1 2022, when interest rates were still extremely low and before the rate hikes began.  

• Since the final quarter of 2022, there are different regional trends in selling conditions sentiment that have emerged. Sentiment held by Ontario and BC have continued their downward trajectory and the single-family HMI in both provinces hit their lowest level ever in Q2 2024 (11.6 in Ontario and 17.8 in BC).  

• Over the same 18-month period, sentiment across the aggregated prairie provinces has trended up and breached the neutral sentiment mark of 50 for the first time since Q2 2022. Meanwhile, builder sentiment in the Atlantic provinces has held steady and is modestly positive.  

• In the US, the NAHB/Well Fargo single family HMI averaged a score of 46.3 in the second quarter. This sentiment was also down from both a quarter ago and a year ago, albeit not as much as the declines seen in Canada. This is reflected in healthier housing starts in the US versus Canada. 

• The present-sales sub-index fell once again, as the majority of builders rated conditions as Poor. With costs continuing to pressure selling prices, the builders experienced another challenging spring sales season. In Ontario, there were no builders that characterized current sales as Good.  

• Builders continue to hope for more normal conditions in the future, based on the expected future selling conditions sub-index. 48% of builders rated future selling conditions as Fair. This proportion has roughly held steady over the past year, and points to expectations of falling interest rates and hope that policy changes will come into effect to help conditions.  

• Single-family sales traffic remained the weakest sub-index, with 60% of builders rating traffic sales and/or inquiries Low or Very Low. This suggests builders experienced an even slower important spring season relative to the same time last year.   

The results from these questions allow CHBA to better understand what is driving change in builder sentiment as well as monitor current industry issues. 

• Builders were asked if June’s 25-basis point lowering of the Bank of Canada’s policy rate affected their answer regarding their outlook on future sales over the next six months. 44% of builders said that rates will need to fall further before they adjust how they rate their outlook on sales conditions over the next six months. 27% stated that the cut did affect their outlook, likely related to how it increased confidence if there are additional rate reductions in the months ahead.  
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• With the majority of builders believing that further rate reductions and/or more time is needed to normalize the level of well qualified demand, builders also reported that their construction activity continues to be hampered. 48% stated that they are building fewer units than they otherwise would have as a result of demand reduction attributable to challenges with mortgage qualification. 22% have stated that the lack of sales have led to the cancellation of projects.  
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• Builders were again asked how they expect 2024 housing starts will compare against their starts in 2023. 61% of respondents expect to have fewer starts. This group of builders on average believed that their number of starts will fall 50% relative to 2023. Several small- and medium-sized builders in BC and Ontario believe that their starts will fall by 80 percent or more. Only 26% of builders felt they would maintain a similar level of starts as last year.  
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• The Canada Housing Plan, within the Federal Budget 2024, announced a lengthening of insured mortgage maximum amortizations from 25- to 30-years for new homes purchased by first-time home buyers (FTHB)—beginning August 1st. This move aims to support the creation of new supply at the entry-level segment of the market. 43% of builders state that they produce homes that could be aimed at first-time buyers. Given affordability and the cost of construction, 30% stated they do not operate in this segment and 18% stated they used to but currently do not. 
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• Based on the extended period of poor sales, pressure on trades access has lowered. 40% of builders characterized trades access as Fine and a further 37% said that access was getting better. The 26% of builders that felt trades access was difficult was down from the 39% that gave this rating a year ago. It is important to note that the underlying shortage in Canada’s construction labour force has not changed and is only muted because of the slowdown in construction; this issue still requires comprehensive policy reform to increase capacity to build once the market begins to turn around.  
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• While trades access is easing, the price of trades is continuing to rise. 37% stated that trades prices are climbing while just 9% felt they have come down. This comes after a period of rapid increase in prices, which have now settled as the new normal. While the majority believed prices are stable, these new high prices are a major source of the higher construction costs builders face.  
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• While it may seem that trades conditions are easing under poor sales conditions, builders and the subcontractors they work with prioritize holding onto their employees. 47% reporting they have not laid off employees, reflecting the desire to retain workers even in this slow period, given the challenges of replacing them when conditions improve. The results of this question are broadly like the results of the Q2 2023 survey. In addition, average year-to-date monthly payroll employment in residential construction is largely unchanged between 2023 and 2024.  
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• Construction material costs also continue to mount. On average, builders estimate that their non-lumber material costs for a 2,400 square foot home have risen by just under $28,000, relative to the prices paid over the first half of 2023. Since the start of 2020, non-lumber material costs for said home will have risen by $70,000. When combined with the costs of lumber, which are also rising, inflation of material prices has added $94,000 to the cost of construction to a 2,400 square foot home compared to 4.5 years ago.  

• The Q1 2024 single-family housing market index value is 34.9, 10.3 points above the record low of 24.6 in Q4 2023. This quarter’s index value is also in line with the level recorded a year ago.
• Despite the increase, it comes on the heels of a 3-year low in sentiment from the previous quarter. This means that negative sentiment, below a value of 50, has prevailed for seven consecutive quarters.
• In comparison to US single-family builders, the NAHB/Wells Fargo HMI averaged 48. This was also an improvement over sentiment in Q4 2023, and is an indication of U.S. home sales improving faster than in Canada.
• Regionally, single-family home builders in Ontario held the most downbeat views on sales once again.
• Open-ended comments from single-family builders were also in line with the responses to the HMI, with many noting extreme drops in sales.
• In a highly interest-rate-dependent market, expectations around summertime rate cut played a role in lifting sub-indices for present selling conditions, expected future selling conditions and sales office traffic levels. The rise in the current sales conditions index is likely related to well-qualified buyers forgoing some interest rate relief over the mortgage term in favour of entering the market ahead of anticipated sale price increases.
• 45% of builders rated current selling conditions as poor and contributed the most to the overall HMI remaining below 50.
• Half of builders rated their expected future selling conditions over the next six months as Fair. Again, this improvement is related to builder expectations that some additional well-qualified buyers will come off the sidelines.
• The sales office traffic subindex was the weakest of the three HMI subindices, as 55% of builders still rated their sales office traffic as Low/Very Low and a further 38% rated traffic volumes as Average.

• The CHBA HMI for single-family builders fell to 33.9 in Q3 2023, 6 points lower from 39.9 recorded in Q2 2023. This is its second lowest reading on record, with data going back to 2021, and is slightly below 34.3 that was recorded in Q1 of 2023. Furthermore, the single-family HMI has reflected downbeat sentiment—below a value of 50—in five consecutive quarters. All three subindices for present selling conditions, expectations for selling conditions in the next six months, and sales traffic of prospective homebuyers deteriorated and contributed to the decline in the single-family HMI between the second and third quarter.
• Regionally, home builders in Ontario were most pessimistic. That said, the third quarter single family HMI readings in British Columbia and the Prairie Provinces also declined.
• The open-ended comments received from builders also follow similarly to sentiment readings. Given the difficulty in gaining mortgage approvals, sales office traffic remains low. Some builders noted that of the few well qualified buyers, there is buyer interest in existing inventory only.
• 47% of single-family HMI respondents rated the current selling conditions as Poor, which is 15 percentage points worse than Q2 2023. Relative to the previous quarter, the proportion of respondents that gave current selling conditions a Fair rating fell by over 17 percentage points to 30.7%.
  • Compared to the national average of 48%, Ontario respondents were most likely to rate current conditions as Poor, at 70%.
• Only 7% of single-family builders rated sales office traffic of prospective homebuyers to be High or Very High. The proportion of builders selecting this rating has now remained in single digits for five consecutive quarters. 55% of respondents rated prospective traffic volume as Low or Very Low, which is an increase of 11 percentage points over the previous quarter but still below the 72% that gave this rating in Q4 2022—when the single-family HMI recorded its all-time low.
  • Both the Prairie Provinces and the Atlantic Region were most likely to select an Average rating. Meanwhile, 79% of builders from Ontario rated traffic conditions as Low or Very Low.

• The CHBA HMI for multi-family builders was 33.6 in Q3 2023. The index fell 7.4 points from the value of 41.0 in Q2 2023 and is closely aligned with the sentiment value of 35.9 recorded a year ago in Q3 2022. Similar to the single-family index, sentiment among multi-family builders has remained downbeat for five consecutive quarters.
• Again, the breadth of downbeat sentiment was widest among builders located in Ontario.
• Comments from strictly multi-family builders suggest prospective buyers are taking longer to make decisions and overall sales traffic volumes were particularly slow through the summer months.
• The proportions of builder ratings for present selling conditions were closely split between Fair (45%) and Poor (44%). Both these ratings saw their proportions worsening among builders over the previous quarter, as the proportion that gave a Good rating fell 12 percentage points to 12%.
  • Builders from Ontario were most likely to be downbeat, with 72% rating current selling conditions as Poor, compared to the national average of 44%. Conversely, the majority respondents in the three other regions rated current selling conditions as Fair.
• The majority (56%) of multi-family builders characterized their expectations of future selling conditions as Fair; 29% of builders gave a Poor rating. On balance, builders across all regions hold slightly more neutral views about the near future relative to current selling conditions.
• A 58% majority of builders of multi-unit projects indicated that prospective buyer traffic was Average. Just one builder gave a sales office traffic rating of High or Very High—the lowest incidence recorded.
  • In Ontario, 72% of multi-unit builders gave a Low or Very Low rating. However, builders in British Columbia were more neutral, with 75% giving an Average rating.

In addition to the survey questions directly used to calculate the HMI, CHBA includes additional “special questions” to ask the expert panel. These special questions allow CHBA to better understand what is driving change in builder sentiment and gain insights into current industry issues. The following are some of the findings from the special questions in the Q3 2023 survey:

• When asked about the impact of the cumulative increases to the Bank of Canada’s policy rate, the builders’ most common answer (40%) was that sales traffic is down and has not shown any signs of recovery. The proportion of builders stating that sales traffic was starting to return fell 11 percentage points from the previous quarter, down to 28%. Meanwhile, those reporting that sales traffic flow has gotten worse fell 9 percentage points over the Q2 2023, and is now at 21%.
  • Builders were asked a follow up question about the impact of the policy rate increases in June and July on sales traffic. 39% of builders reported that these announced rate increases put an end to the springtime recovery in sales office traffic. 29% reported that sales traffic slowed even more—beyond their already low foot traffic.
• With high interest rates reducing demand from qualified buyers and reducing builders’ access to capital, builders were asked if they have had scale back their projects or cancel them completely. 65% of the survey panel stated that interest rates are causing them to build fewer units. Most concerning was the 37% of panelists that stated they have canceled projects as a result—up from 26% of panelists in Q2 2023.
• Corresponding with the retrenchment in both HMI readings, there was an increase of 11 percentage points over the previous quarter, to 44%, in the proportion of builders reporting that they are concerned or extremely concerned about the future for their business.
• Builders were asked to state their difficulties and level of concern surrounding closings of previous sales. 41% of panelists stated that their buyers are having to seek alternative lending solutions, down from 49% in the previous quarter. However, 32% of builders stated that distressed buyers are causing concern about their business, up from 27% in Q2 2023.
• When asked to compare their expectations for their 2023 housing starts relative to 2022, 68% of the panel stated they expect to have fewer starts this year, while just 6% stated they expect to have more starts this year than they did in 2022.
  • Out of the subset of builders that expected to have fewer housing starts this year, the unweighted average percent decline was 47%— this is slightly more than the 40% average reported in the previous quarter.
• Builders were asked about their expectations for starts in 2024, which often depends on demand and conditions in the years prior. 37% of builders stated they expect to build about the same number as they will this year. Closely behind, 35% reported that they expect to start fewer homes next year.
  • Comments from builders highlighted their uncertainty surrounding their expectations. Builders cited the interest rates environment as the overwhelming factor influencing their expectations of housing starts in 2024. Some builders noted that their starts will depend on presale performance, which they are not optimistic about.
• Builders were asked to select any of the most pressing factors, other than interest rates, that are causing them to build fewer homes. The question was also asked again in a hypothetical situation where interest rates and general sales conditions were better. In both instances, over half of builders reported municipal processes as a factor that is reducing their housing starts. The second most widespread factor was a lack of labour.
  • Some builder comments pointed to their own cost of borrowing as a limiting factor. This issue has compounded the problem of rising construction costs and has hindered their ability to begin new projects.
• Asking about supply chain issues, builder comments suggest that supply chain issues for most supplies have improved. Yet only 12% stated that they are experiencing no delays.
  • As with previous quarters, the building supplies with the highest incidence of being in serious shortage remain garage doors (13%) and appliances (11%). However, the proportion of builders reporting the shortage of these supplies as serious has shrunk from last quarter.
• Builders across the entire sample stated that supply chain or labour shortage challenges are delaying their home completions by an average of 7 weeks—the same as last quarter. 9% of builders stated they are not experiencing any delays. With supply chains issues unwinding, 31% reported construction delays of less than 4 weeks. This experience is not uniform across builders as 26% reported delays that are longer than 9 weeks.
• CHBA continued with a question posed last quarter asking about any changes to headcounts—either their own employees or their subcontractors. 42% of builders reported that they had not needed to lay off any workers and this was the most common answer—44% gave this answer last quarter. However, relative to the last quarter, there was a higher proportion of builders that reported they laid off workers without plans to rehire and a smaller proportion stating they hired more workers. According to the Labour Force Survey, the overall construction sector lost shed 58,000 in June and July and partially rebounded by 33,800 in August.
• CHBA continues to monitor factors that are adding to the cost of construction across the country. When asked to characterize their current experience with trades, 59% of builder stated trade prices are up. This was the most common answer and in line with its response rate from Q2 2023. However, this is below the 84% of builders that gave the same answer in Q3 of last year. Other common answers were that access to trades is difficult (46%) and access to trades is causing delays (40%). In both cases, these response rates were slightly above what was reported in Q2 2023 but again — less widespread than in Q3 2022.
• Nationwide, average trades wage growth since before the pandemic is 28%. This is the same average growth rate reported in both Q2 2023 and Q3 2022. Within the answers to the previous survey question, 25% of builders reported that trade prices are stable, the same proportion as last quarter.
• The cost of lumber is a significant contributor to the rise in the cost of construction relative to just prior to the pandemic. Over this time, lumber currently adds an average of $26,600 to the cost of a 2400 square foot home. 26% of builders estimated it has added over $40,000 to the units they typically build.
• Non-lumber material price increases since the onset of the pandemic continue to be both prevalent and significant. On average, non-lumber material prices have added over $45,500 to the cost of a 2400 square foot home. This average increase has relatively remained consistent since Q2 2022. Furthermore, a 51% majority of builders estimated these costs have risen by over $40,000 on their typical build.
• To support CHBA’s work in building sciences and codes, builders were asked about their approach to satisfying building energy codes. 66% of builders stated they use the performance path and 29% stated they use the prescriptive path. Performance path was the more common approach even when sorting responses by builder size. Provincially, this split was driven by the performance path approach being popular among builders in western provinces. However, out of builders in and east of Manitoba, 44% stated they use the performance path and 48% use the prescriptive path.
  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

• The CHBA HMI for single-family builders remains low at 39.9 in Q2 2023. While this represents a second consecutive increase after falling substantially between Q1 and Q4 2022, it still reflects a downbeat sentiment—well below a neutral value of 50. The single-family HMI rose 5.6 points from 34.3 in Q1 2023 but is down 25.8 points from 65.7 recorded a year ago in Q2 2022, and substantially down from its high of 89.4 in Q1 2022 before interest rates started rising.
• Although interest rates created a challenging environment to qualify for a home purchase, the Bank of Canada pausing its successive rate hikes helped improve builder sentiment with some improvement in the downtrodden market. Additionally, the index was given a boost from the traditional busy season coming out of winter.
• 48% of respondents characterized current selling conditions as Fair and 32% rated conditions as Poor.
  • Regionally, half of respondents from Ontario rated current conditions as Poor. Responses from the rest of Canada were more likely to select Fair conditions.
• Looking ahead, 51%, characterized their view of future conditions as Fair. 29% of respondents reported future conditions as Poor. These proportions were similar to the previous quarter. Relative to a year ago, Q2 2022 the proportion of respondents expecting poor sales conditions rose 15 percentage points from 14%.
  • All regions were most likely to rate future conditions as Fair, which was the case in the previous quarter as well. While still sensitive to interest rates, builders are assuming these conditions will persist for the foreseeable future and are adapting accordingly.
• Only 5% of respondents characterized traffic of prospective buyers as High or Very High. This proportion is the same as last quarter but far below the 24% that reported High or Very High sales traffic in Q2 2022. 45% of single-family builders gave a rating of Low or Very low. This is 8 percentage points lower than the 53% reported last quarter but 21 percentage points above the 24% that selected this rating in Q2 2022. While prospective traffic continues to return slowly, it remains definitively below conditions seen in the same quarter last year.

• The CHBA HMI for single-family builders was 34.3 in Q1 2023. This is the first increase in builder sentiment since Q1 2022. The single-family HMI is up 8.1 points from 26.2 from the previous quarter.
• The high interest rate environment has created a lot of uncertainty, but single-family builder sentiment is rebounding slightly as more builders are selecting Fair ratings for the conditions in the next six months.
• 43% of single-family builders rated current conditions as Poor and 40% as Fair.
• 28% rated future conditions as Poor (down 26 percentage points since Q4 2022), and 51% reported the future conditions to be Fair.
  o In terms of future conditions, all regions were more likely to select a Fair rating. Last quarter, the majority of builders were more likely to select a Poor rating indicating conditions seem to be improving slightly.
• Only 5% of single-family builders rated the traffic of prospective homebuyers to be High to Very High. This number is up 2 percentage points since the last survey. 53% of single-family builders rated the traffic of prospective homebuyers to be Low to Very Low (down 18 percentage points since Q4 2022). So a turnaround is being indicated, but overall conditions remain quite poor.

• The CHBA HMI for multi-family builders was 26.0 in Q4 2022. Multi-family sentiment is down 9.9 points from 35.9 since Q3 2022.
• Multi-family builder sentiment did not decline as rapidly as single-family builder sentiment in Q4 2022, but it has declined dramatically since Q1 when it was 88.8 points. Some builders explained that in some areas there could be more multi-family buyers but there is not enough supply. Increasing mortgage rates are creating a high level of uncertainty in both the single-family and multi-family markets.
• 55% of multi-family builders rated current conditions as Poor while 45% rated future conditions as Poor.
  o In terms of future conditions, British Columbia and Atlantic builders were more likely to select a Fair rating, while Ontario and the Prairies were more likely to select poor.
• Only 6% of multi-family builders indicated that they expect the traffic of prospective homebuyers to be High to Very High. 68% of multi-family builders rated the traffic of prospective homebuyers to be Low to Very Low, up 14 percentage points since Q3 2022.

In addition to the survey questions that help develop the HMI, CHBA included additional “special questions” to ask the expert panel. These special questions allow us to better understand the results of the HMI and gain insights into other industry issues. The following are some of the findings from the special questions in the Q4 survey:

• The recent changes to interest rates have impacted the traffic of prospective homebuyers for CHBA members. 77% said that there has been less traffic as a result of increasing interest rates (up 20 percentage points since Q3 2022) and half of CHBA's membership indicated that buyers are delaying purchasing. 30% of CHBA's panel explained that buyers have even started changing their minds.
  o Over half (55%) of builders said it is critical for their business that interest rates stop rising immediately so that more buyers return to the market.
• In Q1 2022, we asked builders if they think their company will have as many housing starts in 2022 as it did in 2021 and 80% of builders said yes. After multiple interest rate hikes, we asked builders how they expect their 2023 housing starts to compare to 2022.
  o 72% stated they expect to have fewer starts in 2023 than they did in 2022. On average, builders expect to have 43% fewer housing starts in 2023.
• We asked CHBA members how far they are sold out in months into 2023. On average, members are sold out about 4 months into 2023. 31% of builders indicated they are not sold out into 2023 at all (I.e., 0 months).
• 59% of CHBA's expert panel indicated that the slowdown in the market is causing them to build fewer units (up 2 percentage points since Q3 2022) and 30% even said that it is causing them to cancel projects (up 6 percentage points since Q3 2022).
  o Given this slowdown in the market, 14% of builders have already started layoffs. However, half of the respondents indicated that they are not expecting to lay off staff at this time, or at least not until after 2023.
  o On the positive side, the slowdown in the market has been improving access to trades according to 43% of CHBA's panel. 36% even said that the slowdown is improving access to materials.
• Overall, almost half of the respondents indicated that they are somewhat concerned regarding their business in 2023 and 16% said they are extremely concerned.
• 66% of CHBA members said that their lumber costs went up by more than $20,000 (down 13 percentage points since Q3 2022) and 31% of respondents indicated that their costs increased by more than $40,000. National average construction costs for lumber on a 2,400 sq ft home are up $29,616, down 21 percentage points since Q3 2022. This is the first major decline in lumber costs since we started this survey in Q1 2021. The highest average cost increase was found to be in New Brunswick (at $44,311) and in Nova Scotia (at $33,662).
• We also asked our panelists about the increase in their construction costs as a result of higher prices for other materials (outside of lumber). About 81% of respondents said that their costs have gone up by more than $20,000 (down 4 percentage points since Q3 2022).
  o National average construction cost increases for a 2,400 sq ft home are $41,623, down 7% since Q3 2022. This is the first decline since Q1 2021.
• Supply chain issues continue to be a challenge for CHBA's membership.
  o In terms of serious shortages, appliances have now been replaced by garage doors as the most impacted product.
• On average, supply chain issues have resulted in 10 weeks in delays in home completions for builders across Canada. The average delay is down one week since Q3 2022. The highest average delay was once again reported by CHBA members in Manitoba at 12 weeks (down 5 weeks since Q3 2022).
• Price volatility, supply chain issues and labour shortages have caused 61% of builders/developers to delay some pre-sales and/or development. This number is down 8 percentage points since Q3 2022.
• 78% of CHBA members explained that with respect to trades, prices are up. This number is down 6 percentage points since Q3 2022. 62% of respondents also stated that access to trades is causing construction delays.
• On average, the cost of labour/trades has gone up 28%, compared to prior to the pandemic, unchanged from the previous quarter. The highest average labour  cost increase was in Nova Scotia (up 31%) and in British Columbia (up 30%).

• The CHBA HMI for single-family builders was 43.4 in Q3 2022. This is the second major decline in builder sentiment this year. The single-family HMI is down 22.3 points since Q2 2022 and down 34.4 points since Q3 2021.
• 93% of single-family builders say home sales are slowing.
• 30% of single-family builders rated current conditions as Good (down from 59% in Q2 2022) while almost half (46%) rated future conditions as Fair (unchanged from the previous quarter).
  o About half of the builders in British Columbia and the Prairie Provinces rated current conditions as Fair, while 54% of the builders in Ontario rated current conditions as Poor.
  o In the Atlantic Region, most builders selected a Good rating for current conditions.
• Only 7% of single-family builders rated the traffic of prospective homebuyers to be High to Very High. This is down 17 percentage points since Q2 2022. Almost half of the HMI panel (46%) rated the traffic of prospective homebuyers to be Low to Very Low.
  o In Ontario, 79% of respondents rated the traffic of prospective homebuyers to be Low to Very Low.

• The CHBA HMI for multi-family builders was 35.9 in Q3 2022. Multi-family sentiment is down 24 points since Q2 2022 and down almost 42 points since Q3 2021.
• 92% of single-family builders say home sales are slowing.
• 20% of multi-family builders rated current conditions as Good (down 27 percentage points since Q2 2022) while 44% rated future conditions as Fair (up 1 percentage point).
• Only 5% of multi-family builders indicated that they expect the traffic of prospective homebuyers to be High to Very High (down 16 percentage points since Q2 2022).
  o Almost all of the regions were most likely to select a Low to Very Low rating, apart from the Atlantic Region, where more multi-family builders rated conditions as Average.
• Over half of the multi-family builders (54%) rated the traffic of prospective homebuyers to be Low to Very Low (up 29 percentage points since Q2 2022).

• The CHBA HMI for single-family builders was 65.7 in Q2 2022, declining by almost 24 points since Q1 2022 and by 17.2 points since Q2 2021.
• This is the second time the single-family HMI declined since CHBA launched the HMI in Q1 2021. Previously, in Q3 2021, the decline reflected challenges with the supply chain and labour, but the HMI had rebounded in Q4 2021 and climbed further in Q1 2022.  The current Q2 drop can therefore be seen as a direct result of increasing interest rates, added on top of pre-existing challenges.
• Only 24% of single-family builders rated the traffic of prospective homebuyers to be High to Very High. This number is down 45% since Q1 2022.
• Despite the overall dramatic drop in the HMI and its likely implications, the majority (59%) of single-family builders rated current conditions as Good while almost half (46%) rated future conditions as Fair.

• The CHBA HMI for multi-family builders was 59.9 in Q2 2022, declining by almost 29 points since Q1 2022 and by 24 points since Q2 2021.
• As with the single-family builders, the Q2 decline reflects the uncertainty around certain aspects of the housing market including interest rate changes and supply chain issues.
• Only 21% of multi-family builders indicated that they expect the traffic of prospective homebuyers to be High to Very High. This is down 49% since Q1 2022.
• 25% of multi-family builders expect traffic to be Low to Very Low. This is up 22% since Q1 2022.
• About half (47%) of multi-family builders rated current conditions as Good while 43% rated future conditions as Fair.

• The CHBA HMI for single-family builders was 89.4 in Q1 2022, increasing by 6.2 points since Q1 2021 and by 4.5 points since Q4 2021.
• This reflects strong builder confidence and is a result of continuously increasing demand for single-family homes since the onset of the pandemic. The single-family HMI reached its all-time high in Q4 2021, but that record has now been surpassed as the single-family HMI in Q1 2022 at 89.4 is now the highest since the HMI was launched in Q1 2021.
• The majority of single-family builders rated current and future conditions as Good (87% and 80%, respectively). This is prevalent across all regions, especially in the Atlantic Region, where none of the builders selected a Poor rating.
• Since Q1 2021, the single-family HMI is up 7%. The number of respondents rating current and future conditions positively increased during the year, with 10% more respondents selecting a Good rating for current conditions and 7% more respondents selecting a Good rating for future conditions. 32% and 21% more respondents from the Prairie Provinces and the Atlantic Region (respectively) selected a Good rating for current conditions, compared to Q1 2021, indicating that conditions have improved significantly in the past year in these two regions.
• 69% of single-family builders rated the traffic of prospective homebuyers to be High to Very High. In the Atlantic Region and British Columbia, 86% and 80% of respondents (respectively) rated conditions to be High to Very High. Last quarter, the Prairie Provinces were the only region to be most likely to select an Average rating. This quarter all of the regions were most likely to select a High to Very High rating. Between Q4 2021 and Q1 2022, 16% more builders rated the traffic of prospective homebuyers to be High to Very High.
• Since Q1 2021, 6% more single-family builders rated the traffic of prospective homebuyers as High to Very High and the number of respondents who rated traffic to be Low to Very Low is down 8%. The number of respondents that selected a High to Very High rating in the Prairie Provinces and the Atlantic Region is up 25% and 21%, respectively.

• The CHBA HMI for multi-family builders was 88.8 in Q1 2022. This is up 2% since Q4 2021.
• At the onset of the pandemic, the condo market softened slightly as more Canadians elected to live in bigger spaces outside of the urban cores. With the vaccine rollout and generally better economic conditions, the condo market started growing again and this is reflected in the HMI.
• The majority of multi-family builders rated both current and future conditions as Good (86% and 79%, respectively).
• Since Q1 2021, the multi-family HMI is up 9%. The number of respondents rating current and future conditions positively increased during the year, with 8% more respondents selecting Good for current conditions and 6% more respondents selecting Good for future conditions. 56% more respondents from the Prairie Provinces selected a Good rating for current conditions, compared to Q1 2021, indicating that conditions have improved significantly in the past year in this region.
• 70% of multi-family builders expect the traffic of prospective homebuyers to be High to Very High. This is up 17% since Q4 2021. As was observed in Q4 2021, the Prairie Provinces continue to be the only region to be most likely to select an Average rating. Interestingly, none of the multi-family builders in the Prairie Provinces selected a Low to Very Low rating.
• About 3% of multi-family builders expect traffic to be Low to Very Low. This is down 4% since Q4 2021.
• Since Q1 2021, 14% more multi-family builders rated the traffic of prospective homebuyers Good and the number of respondents who rated traffic to be Low to Very Low is down 12%. The number of respondents that selected a High to Very High rating is up for all the regions since Q1 2021. In the Prairie Provinces, there are now 33% more respondents rating traffic as High to Very High compared to Q1 2021.

• The CHBA HMI in the single-family market was high in Q4 2021, at 84.9, increasing by 1.7 points since Q1 2021 and by an astounding 7.1 points since Q3 2021.
• This illustrates strong builder confidence in Canada due to the increased demand for single-family homes over the past year and continued strength into the fourth quarter. Throughout the year, quarter-to-quarter sentiment was declining due to a number of uncertainties in the housing market. But sentiment is on the rise again as some of the uncertainties that were present throughout the year have been reduced, and the market adjusts to persistent higher material prices, longer build times, but continued consumer demand. The likely increase to interest rates in 2022 may also be pulling forward activity.
• The majority of single-family builders rated current and future conditions as Good (84% and 76%, respectively). This is prevalent across all regions, especially in the Atlantic Region and British Columbia, where none of the builder panelists selected a Poor rating. All of the regions were most likely to select a Good rating for both present and future conditions. Looking at the next six months, none of the respondents from Ontario and British Columbia selected a Poor rating. Comparing the Q3 and Q4 data, about 11% more builders rated current conditions as Good, reflecting a re-strengthening in the market towards the end of the year.
• Nationally, 53% of single-family builders rated the traffic of prospective homebuyers to be High to Very High. In British Columbia and Ontario, 63% and 61% of respondents (respectively) rated conditions to be High to Very High. Between Q3 and Q4, 11% more builders rated the traffic of prospective homebuyers to be High to Very High. The Prairie Provinces (especially respondents in Alberta) were most likely to select an Average rating and about 10% of the respondents in the Prairies rated the traffic of prospective homebuyers to be Low to Very Low.
• We asked the respondents who selected a High to Very High or Average rating to provide more insights and we found that 77% of builders attribute the traffic of prospective homebuyers to high demand for new construction, reflective of the market that has evolved through the pandemic. This number is up 9% since Q2 2021.
• Only 7% of builders noted traffic to be low, but of those, 64% of the respondents indicated that supply chain issues are causing significant delays in home completions. Interestingly, when we compare the Q4 and Q2 surveys, 26% fewer respondents expect lumber and other materials prices to continue rising over the coming months. This is consistent with the Bank of Canada expectation that we are currently peaking at supply chain issues, which should start to come back to normal over the course of 2022.

• The CHBA HMI for multi-family builders was 87.1 in Q4 2021. This is up 7% since Q1 2021 and up 12% since Q3 2021.  This is an extremely strong HMI score.
• This strong sentiment number can be attributed to a growing condo market in 2021 and into 2022. Apartment housing starts have been continuously growing throughout the year and have grown by 31% between November 2020 and November 2021.
• The majority of multi-family builders rated both current and future conditions as Good (86% and 72%, respectively). As with the single-family builders, about 14% more multi-family builders rated current conditions as Good and about 9% more builders rated future conditions as Good in Q4 2021. In British Columbia and the Atlantic Region, none of the builders selected a Poor rating (for both current and future conditions).
• 63% of multi-family builders expect the traffic of prospective homebuyers to be High to Very High. This is up a dramatic 25% since Q3 2021. This was especially the case British Columbia where 77% of the multi-family builders expect traffic to continue to be very high (as it has been over the past year). The Prairie Provinces were the only region to most likely select an Average rating and about 24% of the respondents in this region rated conditions as Low to Very Low.
• For the 93% of builders with positive sentiment (i.e., having rated traffic as either Average or High to Very High): 77% of builders attribute the traffic of prospective homebuyers to house prices rising across the country (up 17% since Q3 2021).
• For the 7% of builders with negative sentiment (i.e., having rated traffic as Low to Very Low), 29% of the respondents indicated that supply chain issues are causing significant delays in home completions. This is up 11% since Q2 2021. Slowing home sales and the expectation that lumber and other materials prices will continue rising were the other top reasons for lower sentiment.

• The CHBA HMI shows that builder confidence in the single-family market was high in Q3 2021, at 77.8, though declining by 5.1 points since Q2 2021. In Q1 2021, the single-family HMI was 83.2, which is a 7% decline between the three quarters. Note that HMI numbers are not seasonally adjusted.
• While the drop is reflective of challenges with the supply chain and with labour, the still-reasonably-high HMI illustrates continued builder confidence in Canada due to the increased demand for single-family homes. A variety of factors are reflected in the quarter-to-quarter sentiment decline, including changes to the stress test, but also very much the impacts of the pandemic on the supply chain and labour. Supply chain issues are a continuing problem, as more than 55% percent of panelists said that they are delaying some pre-sales and/or development due to price volatility. On average, the higher cost of lumber has increased CHBA’s members’ costs on a typical home by $34,562. This is 1.8 times higher than when we conducted the survey in Q1 2021.
• Given the HMI uses a 100-point scale, 77.8 is a reasonably high sentiment number, reflecting strong builder confidence. As a comparator, NAHB’s single-family HMI (which is similar to CHBA’s) hit 90, a record high, in November 2020, but it fell to 76 in September 2021 as material and labour challenges persist.
• The majority of single-family builders rated current and future conditions as Good (73% and 59%, respectively). Comparing Q2 and Q3 data, in Q3 about 7% fewer builders rated current conditions as Good, reflecting a slight slowing of the market of record-pace, and the impact of the stress test on the market, which we discuss in more detail below.
• Forty-two percent of single-family builders rated the traffic of prospective homebuyers to be High to Very High, down 21% since we conducted the Q1 survey. Growth in investment in building construction, housing starts, building permits, home sales and home prices has been slowing in the past few months. However, all of these indicators recently reached incredible highs so a return to more typical levels of activity can be expected. A recent report by the Royal Bank of Canada indicated that housing starts over the past year have been their strongest since 1977 and the number of new housing units currently under construction is at an all-time high.  And while sentiment appears to be declining slightly overall across Canada, in Ontario and the Atlantic Region over half of builders rated the traffic of prospective homebuyers to be High to Very High.
• We asked the respondents who selected a High to Very High or Average rating to provide more insights and we found that 74% of builders attribute the traffic of prospective homebuyers to high demand for new home construction, reflecting the market that has evolved through the pandemic as homebuyers seek more space and are able to move further from urban cores. This is up 6% since we conducted the Q2 survey.
• Only 13% of builders noted traffic to be low, but of those, 88% of the respondents noted that the traffic is indicative of home sales slowing. Seventy-three percent of respondents also explained that they selected a Low rating because supply chain issues are causing significant delays in home completions. This continues to be the second most popular response since the Q2 survey. Lumber and other material prices slipped from the number one issue in Q2 to number 3.

[1] https://financialpost.com/real-estate/there-has-never-been-more-housing-under-construction-in-canada-but-the-city-that-needs-it-the-most-is-missing-the-boom

• The CHBA HMI for multi-family builders was 77.6 in Q3 2021, having started the year at 81.6 in Q1, then going up to 83.9 in Q2 with multi-unit activity growing as impacts of the pandemic on this part of the sector eased. The Q3 decline reflects the uncertainty around certain aspects of the housing market including supply chain issues. The stress test certainly also had an impact, as 32% of multi-family builders indicated that it had impacted their sales, with many panelists pointing to less qualified buyers which resulted in less sales.
• Nevertheless, 77.6 remains a strong sentiment number and can be attributed to an overall growing condo market in 2021.
• The majority of multi-family builders rated both current and future conditions as Good (72% and 63%, respectively). As with the single-family builders, about 7% fewer multi-family builders rated future conditions as Good in Q3 2021.
• Thirty-eight percent of multi-family builders indicated that the traffic of prospective homebuyers was High to Very High. This was especially the case in British Columbia where half of the multi-family builders expect traffic to continue to be very high (as it has been over the past year).
• We asked the respondents who selected a High to Very High or Average rating to explain why they selected this rating and we found that 71% of builders attribute the traffic of prospective homebuyers to high demand for new condo construction, which was originally slow during the COVID-19 pandemic but has accelerated in recent times. This is up 3% since we conducted the Q2 survey.
• Of the 10% of builders who ranked prospective homebuyers as low, 56% of builders noted that the traffic of prospective homebuyers is currently low because supply chain issues are causing significant delays in home completions. This is up an astounding 38% since Q2.

• The CHBA HMI shows that builder confidence in the single-family market was high in Q2 2021, at 82.9.
• Given the HMI uses a 100-point scale, this is a high sentiment number, reflecting strong builder confidence. As a comparator, NAHB’s single-family HMI (which is similar to CHBA’s) hit 90, a record high, in November 2020.  It came down to 82 on average in Q2 as a result of increasing lumber prices and other supply chain issues. Ninety is the highest NAHB HMI score since NAHB started collecting this data in 1985.
• In Q1 2021, the single-family HMI was 83.2, hence the 82.9 Q2 rating is a slight decline between the two quarters. Despite the slight decline, the reading above 80 indicates a signal of strong demand in the housing market. The COVID-19 pandemic has accelerated homeownership aspirations for many and the demand for more space and living outside of the urban core continues to fuel the growth of the single-family market. Note that HMI numbers are not seasonally adjusted.
• The majority of single-family builders rated current and future conditions as Good (80% and 70%, respectively). Comparing Q1 and Q2 data, in Q2  about 3% more builders rated current conditions as Good, indicating strong current sales as predicted for future sales in Q1; also in Q2, about 3% fewer builders rated future conditions as Good, reflecting the uncertainty around potential interest rate changes and the impact of the stress test on the market.
• 56% of single-family builders rated the traffic of prospective homebuyers to be High to Very High, down 7% since we conducted the Q1 survey. This is also visible in the housing starts and building permits data that have started slowing from their historical highs. While this indicates a gradual softening in the market quarter-to-quarter and month-over-month, the year-over-year data still shows extreme strength and growth in the housing market.
• We asked the respondents who selected a High to Very High or Average rating to provide more insights and we found that 68% of builders attribute the traffic of prospective homebuyers to high demand for new home construction, reflecting the market that has evolved through the pandemic.
• Meanwhile, the respondents who found prospective buyer traffic to be low attribute it to rising lumber and other materials' prices driving up construction costs and sales prices.

• The CHBA HMI for multi-family builders was 83.9 in Q2 2021, increasing by 2.3 points since Q1 2021. This is reflective of increasing condo demand in the past few months. At the onset of the pandemic, condo demand declined slightly as more people were interested in having a larger space and living outside of the urban core. With a rebounding economy and accelerated vaccine administrations across the country, we are seeing condo demand tick back up again.
• The majority of multi-family builders rated both current and future conditions as Good (79% and 70%, respectively). As with the single-family builders, about 3% fewer multi-family builders rated future conditions as Good in Q2 2021, which reflects the uncertainty around certain aspects of the housing market including impacts of the stress test changes.
• That said, 54% of multi-family builders indicated that traffic of prospective homebuyers was High to Very High.
• We asked the respondents who selected a High to Very High or Average rating to explain why they selected this rating and we found that 68% of builders attribute the traffic of prospective homebuyers to high demand for new condo construction, which was originally slow during COVID but has accelerated in recent times.
• 45% of builders noted that the traffic of prospective homebuyers is currently low and is indicative of home sales slowing.

In addition to the survey questions that help develop the HMI, CHBA included a few additional “special questions” to ask the expert panel. These special questions allow us to better understand the results of the HMI and other industry issues. Given the volatility of supply chains, CHBA has opted to address the following questions in the Q2 survey:

• Overall, 84% of builders have increased the price of homes as a result of increasing lumber prices and 72% of respondents have started ordering/securing prices as far in advance as possible.
  • Out of the builders who increased the price of homes, 35% were located in British Columbia, followed by Ontario (31%) and the Prairie Provinces (31%).
• Over half (52%) of CHBA members said that their construction costs went up by more than $30,000 and an overwhelming 30% of respondents indicated that their costs increased by more than $40,000 as a result of surging lumber prices.
• About 42% of respondents said that their construction costs due to rising prices of other materials (outside of lumber) have gone up by between by over $20,000.
• Many builders have started substituting certain materials due to the continuously rising prices. Out of the respondents who have started substituting materials, 50% have started substituting insulated concrete forms and foam sheathing.
• In Q1, the average overall construction delay nationally was 6 weeks due to material shortages. This question was not repeated in Q2, but all indications are that these delays have increased.
• Skilled trades shortages in terms of access to trades were also identified by over 40% of respondents, with 79% indicating prices with respect to trades have increased.
• Almost half (46%) of the builders are experiencing roadblocks between the time a sales contract is signed and a building permit is issued.
• The lengthy timelines were especially prominent in British Columbia and Ontario.
• Once a permit is issued, home construction for most (43%) tends to begin in less than two weeks, reflecting builders’ ability to get moving quickly once the municipality has given necessary approval.

• The CHBA HMI for multi-family builders is 81.6 in Q1 2021.
• The majority of multi-family builders rated both current and future conditions as Good (78% and 73%, respectively).
• 56% of multi-family builders indicated that they expect the traffic of prospective homebuyers to be High to Very High.
• When asking builders about current conditions and the traffic of prospective homebuyers, we can see that the average increase in construction costs due to increasing lumber prices rises as sentiment declines. Respondents who indicated that conditions are Poor had an average increase of costs of 11% higher (for current conditions) than those who selected Good.
• The traffic of prospective homebuyers question shows a direct relationship between sentiment and delay, as sentiment declines as delay rises. Overall, the average delay for the respondents who indicated conditions are Low to Very Low is 57% higher.
• For the costs associated with other supply chain issues, the average increased construction costs rise consistently across the three HMI questions as sentiment declines.
• Multi-family builders who rated current conditions as Good and Fair were more likely to say that their workforce has fully rebounded.

In addition to the survey questions that help develop the HMI, CHBA included a few additional “special questions” to ask the expert panel. These special questions allow us to better understand the results of the HMI and other industry issues. The special questions are optional and may not be asked for every round of the survey. Given the volatility of supply chains, CHBA has opted to address the following questions in the Q1 survey:

• Most builders (34%) indicated that the higher cost of lumber increased their construction costs by between $10,001 to $20,000.
• All increased construction costs are significantly higher for single-family homes; however, the average delay is shorter for single-family homes than townhomes (5.48 weeks in delays versus 7.8 weeks in delays).
• About 60% of builders indicated that supply chain issues resulted in significant cost increases and delays in home completions.
  • National average construction cost increases for a 2,232 sq ft home are $19,447.
  • On average, supply chain issues have resulted in almost 6 weeks of delays in home completions for builders in Canada.
• Overall, the panelists outlined several key challenges due to supply chain issues. Appliances were by far the most mentioned product that has been impacted.
• 43% of panelists indicated that price volatility has resulted in their company delaying some pre-sales and/or development.
• 68% of respondents indicated that their workforce has fully rebounded.
  • 21% are having trouble hiring staff.
  • Only 3% of survey respondents said that they have not rebounded.
  • Almost 60% of respondents indicated that hiring will increase over the next six months.
• Most respondents (37%) indicated that with respect to trades, costs are up.

Single-family respondents and the HMI:

• Across all three HMI questions, the average increase in construction costs due to increasing lumber costs rises as sentiment declines.
• Respondents who rated conditions as Poor had a higher average increase in costs (13%) than those who rated conditions as Good.
  • This was also the case in terms of the traffic of prospective homebuyers question, where the difference between  those who rated conditions highly and those who rated conditions poorly was 12%.
• Average delay goes up as sentiment goes down for the traffic of prospective homebuyers.

Multi-family respondents and the HMI:    

• When asking builders about current conditions and the traffic of prospective homebuyers, one can see that the average increase in construction costs due to increasing lumber prices rises as sentiment declines.
• Respondents who indicated that conditions are Poor had an average increase of costs of 11%  higher than those who indicated that conditions are Good.
• The traffic of prospective homebuyers question shows a direct relationship between sentiment and delay, as sentiment declines as delay rises. Overall, the average delay for the respondents who indicated conditions are Low to Very Low is 57% higher.