Homebuilder sentiment keeps declining: continued policy and interest rate changes needed to turn around market
OTTAWA – November 13, 2024 – Builder sentiment across the country continued to decline in the third quarter according to the results from the Canadian Home Builders’ Association (CHBA) 2024 Q3 Housing Market Index (HMI), with Ontario and British Columbia in particularly dire circumstances. The single-family HMI recorded a score of 27.4, which is down 2.5 from last quarter. The multi-family HMI is down 4 points from last quarter with a score of 28.5. Both indexes are approaching the record lows seen in Q3 2023. While lower interest rates and other policy measures being implemented should eventually help increase sales activity, fixed-rate mortgages – the most popular mortgage product in Canada – have not yet gone down enough to impactfully improve affordability and result in more sales activity.
Underlying regional trends in builder sentiment have widened. Builder sentiment remained abysmal in Ontario, reflecting effectively no builders experiencing good selling conditions. Sentiment in British Columbia soured to record lows, while the Prairies and Atlantic Canada fell from mildly positive sentiment to mildly pessimistic. The multi-family HMI in the Prairies, while still strong, was less optimistic this quarter. The sole positively-trending index of all the regional breakdowns is the multi-family HMI in Atlantic Canada, which is only responsible for less than 5% of national starts.
This data punctuates the need for a continued and increased multi-pronged approach to effectively help affordability challenges caused by Canada’s chronic lack of housing supply, which should include monetary and macroprudential policy easing in addition to other housing policy measures at all levels of government to facilitate building the homes needed to close the supply gap.
The federal government’s expansion of allowing 30-year amortization periods for insured mortgages for first-time buyers (which non-insured mortgage holders already have access to) and all buyers of new construction homes, as well as a higher limit on insured mortgages to reflect today’s house prices, are due to come into effect on December 15, and will help ease the pressure for a portion of buyers trying to get into the market while simultaneously stimulating new home construction. Other measures,
It is also worth noting that looking at housing start numbers to gauge the health of the industry does not tell the full story when it comes to homes for ownership. Housing starts data up to August, relative to 2023, was essentially flat, rather than declining. This is because while housing starts would normally be tumbling in lockstep with a declining builder sentiment, CHBA’s HMI relates only to new construction for ownership. When housing start numbers are further analyzed, we see that while there was some growth in the number of units slated for the rental market, housing starts for homeownership were down 17% through the first nine months of the year relative to 2023 – hence the consistently downbeat results of CHBA’s HMI, and the frustration of Canadians still unable to join the ranks of homeownership.
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MEDIA INQUIRIES
Journalists wishing to interview Kevin Lee, Chief Executive Officer of the Canadian Home Builders’ Association are encouraged to submit their request by email to media@chba.ca.
About the HMI
CHBA’s HMI provides a leading market indicator for both the single-family and multi-family markets in Canada, before permits and starts. Released on a quarterly basis, the HMI provides insight into the industry, including many of the issues that are affecting housing affordability, with a strong correlation to future housing starts. The data for the CHBA HMI comes from an exclusive panel of hundreds of CHBA home builders and developers from coast to coast. Every quarter, this panel responds to a series of questions about market conditions. CHBA then uses proprietary statistical analysis to prepare the quarterly HMI. In addition to the standard HMI questions, each quarter CHBA asks “special questions” that allow the Association to gather data and insights into current issues affecting the industry across the country.
For more information on CHBA’s HMI, including the detailed methodology and key takeaways, please visit the official CHBA HMI webpage.