The U.S. Housing Market Is Hot. Canada’s Is Even Hotter
(Bloomberg) -- Discouraged U.S. homebuyers, take heart. At least you’re not house-hunting in Canada.
The U.S.’s cold-weather neighbor to the north has the hottest housing market in North America, according to a report Thursday by Toronto-Dominion Bank. Even as the pace of U.S. sales increased by 13% in March compared with 2019, the increase was a whopping 75% in Canada, according to the report by senior economist Sri Thanabalasingam. The average home price in Canada rose 32% from a year ago, almost twice the rate of increase in the U.S., the report said.
Tight supply, low borrowing costs and pandemic-inspired demand for larger homes in both countries have prompted bidding wars, offers six figures above asking price, and a record surge in overall home values -- the U.S. last week reported a record median gain of 16.2% in the first three months of the year.
The report found some notable differences between the two housing markets that may partly explain Canada’s hypergrowth.
Population expansion has been faster in Canada than in the U.S., for example, particularly in the three-year period before the pandemic when Prime Minister Justin Trudeau increased immigration just as the U.S. under President Donald Trump was throwing up barriers to entry. Canadians also escaped the 2008 financial crisis without much loss to their home values -- registering a 0.5% decline compared with 12% in the U.S. -- leaving them with less financial scarring to inhibit purchasing now, the report said.
As more people are vaccinated against Covid in both countries and pandemic restrictions begin to ease, the demand for urban rentals may pick up again at the expense of suburban home sales, the report said. But Canadians have demonstrated a greater fear of missing out than their American cousins have, the report noted, which could mean the housing boom persists.
“Canadian housing activity could continue to outpace the U.S. in the near term,” Thanabalasingam wrote. “But this would further worsen affordability issues in Canada, implying a greater downside risk over the medium term, especially if policy makers seek to implement measures to cool housing demand.”
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