Homebuying Today Versus 2013: Here’s How The Canadian Housing Market Is Similar
A new report draws parallels between market conditions today and those from ten years ago, saying that “buyer mentality, mortgage rates, unaffordability, and demographics were not as opposing and could provide an indication of future trends.”
In many ways, we’re in an outlying time for real estate. Canadians are reeling from what is being regarded as the most aggressive rate hike campaign in Bank of Canada history, and amid soaring borrowing costs, owning a home is far less attainable than it once was.
Even so, a new report from Zoocasa draws a number of parallels between market conditions today and those from ten years ago, saying that “buyer mentality, mortgage rates, unaffordability, and demographics were not as opposing and could provide an indication of future trends.”
Pressed Housing Affordability
Although home prices have nearly doubled over the past decade — the national average grew from $365,700 in January 2013 to $705,000 in January 2023 — both points in times can be characterized by a lack of housing affordability.
In fact, according to the Bank of Canada’s Housing Affordability Index, which measures how housing-related costs like mortgage payments and utility fees stack up to average household disposable income, unaffordability rose from Q1 of 2013 to Q4 of 2013, and has never returned to the level it was in Q1 of 2013.
What’s more, prices in 2013 were on the cusp of stabilizing, much like they have this year, in the aftermath of the “pandemic spike,” writes Mackenzie Scibetta. “The extreme ups and downs of recent years are outliers, meaning if prices are stabilizing, we might expect a more predictable, slower rate of growth to come in the future.”
The Return Of First-Time Buyers
2013 also saw an uptick in buying activity, particularly with respect to major urban centres, including Greater Vancouver, Greater Toronto, Calgary, and Hamilton-Burlington. This was attributed to low-interest rates, says Scibetta, which “helped to push first-time homebuyers into the market as mortgage payments remained affordable and predictable.”
Although mortgage affordability today is nowhere near what it was ten years ago, major Canadian real estate markets are similarly seeing hearty demand from first-time buyers, including new Canadian buyers, who are flooding into the country at a record pace.
“Also fueling the competition are first-time homebuyers, who largely stayed on the sidelines in 2022 but have now adjusted to the prospect of interest rate hikes and are eagerly participating in the market,” continues Scibetta. She adds, however, that housing demand is panning out a little differently these days. “Buyers today value affordability and larger living spaces, which is leading to heightened interest in smaller maritime cities and the prairies.”
Fixed-Rate Rate Pain
Interest rates hit a 22-year high this year, with the Bank of Canada bringing its benchmark rate to 5% in July. Although the current lending rate is “drastically” higher than it was in 2013 — when the overnight lending rate was at 1% and remained at that level until January 2015 — fixed-rate mortgage holders “were not as far away from today’s rate,” says Scibetta.