OTTAWA – The recently released Canadian Home Builders’ Association (CHBA) 2024 Q2 Housing Market Index (HMI) found home builder sentiment is negative for the eighth consecutive quarter and is even lower than Q1 across key regions of the country.
The HMI is a sentiment indicator that assesses current selling conditions, expectations for selling conditions over the next six months and the level of sales office traffic. It’s an indicator of expected housing starts six months and beyond.
According to the CHBA, the initial interest rate lowering was not enough to offset restrictive mortgage rules and other barriers to increase new home sales.
The broadly negative view about the health of new home sales indicates that housing starts activity, at least for homeownership, will not pick up substantially any time soon, the association noted, adding the full effects of the slowdown have yet to be felt in housing starts numbers because of long building timelines, especially for multi-family buildings.
The index found sentiment in Ontario and British Columbia has reached record lows which is concerning as these provinces are facing the greatest affordability challenges and have the largest need for much more housing supply.
In Ontario, record lows of 11.6 (out of 100) for both the single- and multi-family HMI point to severe drops in housing starts ahead and a worsening deficit in housing supply, states a release. B.C., has a single-family HMI of 17.8 and a multi-family HMI of 32.5.
The extremely low HMI values in Ontario and B.C. are reflective of both the very high prices in those provinces and the inability of buyers to access mortgages.
Forty-eight per cent of HMI respondents stated that they are building fewer units than they otherwise would have as a result of challenges with mortgage qualifications for their customers and 22 per cent have stated that lack of sales has led to the cancellation of projects. Overall, 61 per cent of respondents expect to have an average of half the number of starts this year compared to 2023.
“The slowly dropping interest rate environment is not enough to counter the restrictive mortgage rules contributing to buyers’ inability to enter the market with today’s house prices,” said CHBA CEO Kevin Lee, in a statement. “Canada continues to need both more supply and changes to mortgage rules to help drive the construction of that supply. If buyers can’t get better access to mortgages, and municipalities don’t lower development taxes and address the barriers to home building, the chronic undersupply of homes will only get worse in many areas of the country, which will drive up house prices again. Much more policy change is needed to turn the tides and get housing supply momentum underway.”
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