Canada’s housing market has just experienced one of the sharpest corrections in modern history, with home prices falling roughly 20 per cent nationally from their 2022 peak. Unfortunately, Canadians claim the dip is not enough, particularly younger adults hoping to buy their first home. While prices may have sunk 20 per cent, housing affordability remains largely out of reach for young Canadians. A new Bloomberg analysis argues that the downturn has exposed a deeper problem. According to the analysis, prices became so detached from incomes that even a major correction has failed to restore affordability. For many buyers, the market remains nearly as inaccessible as it was before the decline began. The analysis cited the pandemic housing boom as a lasting factor impacting prices.
Benchmark home prices have fallen approximately 20 per cent nationally since 2022, with declines exceeding 30 per cent in some markets. Even then, the Nanos Research poll conducted by Bloomberg found that 55 per cent of Canadians need prices to fall even further. Among Canadians aged 18 to 34, that figure rose to 69 per cent. Interestingly enough, even current homeowners largely support further declines. Roughly two-thirds of homeowners surveyed said falling home prices were either a positive or somewhat positive development for Canada’s housing market, a surprising statistic for some.
If you just look at the numbers, you would very quickly conclude this is a massive crash in home prices. But the thing is, it’s after prices had increased even more,
-Robert Hogue, assistant chief economist, RBC
Why such a significant correction?
Economists say the reason for the dip is simply the housing market returning to its norm. The correction is largely erasing the extraordinary gains recorded during the pandemic rather than creating genuinely affordable housing. Robert Hogue, assistant chief economist at RBC, said that while the drop appears dramatic on paper, it follows an even larger surge in prices between 2020 and 2022. In many regions, home values have merely returned to roughly where they stood before the pandemic. The problem, experts note, is that affordability was already considered a national crisis before COVID-19 ever arrived.
Mike Moffatt, founder of the University of Ottawa’s Missing Middle Initiative, argued the decline highlights how fundamentally disconnected housing prices have become from household incomes. According to Moffatt, prices can fall 15 to 20 per cent and still remain beyond the reach of many middle-class families. He said the current market demonstrates just how severely affordability deteriorated over the last decade. While politicians often laud falling prices as evidence that the crisis is easing, many prospective buyers are finding that ownership remains mathematically impossible without substantial family wealth or unusually high incomes.
I think it just shows how far out of whack prices are with incomes that prices can go down 15% to 20% and it’s still priced out middle-class families
-Mike Moffatt
Major cities are struggling even more
The affordability crisis is especially severe in Canada’s largest cities. RBC data cited in the report shows that households in Vancouver still need to devote approximately 88 per cent of their income to ownership costs, while Toronto households require about 63 per cent. Those figures remain among the highest in North America despite years of falling prices. In practical terms, many younger Canadians continue facing the same barriers they encountered before the correction: high down-payment requirements, elevated mortgage costs and incomes that have failed to keep pace with housing values.
High prices affecting markets
The situation has created an unusual housing market where prices are falling, but buyers remain hesitant. Toronto realtor Alexis D’Souza told Bloomberg that first-time buyers increasingly ask whether prices could decline further before making a purchase. Some Canadians who bought near the market peak have already experienced the consequences firsthand. D’Souza said the condominium she purchased with her partner in 2022 has declined in value since then. That uncertainty has made many prospective buyers reluctant to enter the market despite improving conditions compared to several years ago. The market’s instability means that most Canadians cannot afford a home, but even the ones who can are hesitant to risk a poor return on their investment.
For now, Canada’s housing market remains stuck in an unsustainable middle ground. Prices are falling, rents are easing, and inventory is rising, yet many Canadians still cannot afford to buy homes. The result is a paradox few would have predicted during the pandemic housing frenzy: one of the largest housing corrections in decades has occurred, but for a majority of aspiring homeowners, the prospect of ownership remains just as distant as before.
