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USA vs. Canada: Whose Housing Market is Better?

Finding a new home has always been challenging, and watching prices go up in North America over the last ten years is enough to scare even the most optimistic of us.

The markets in the US and Canada are quite different, so who has it better? What can the average buyer expect when looking for housing in both countries?

To assess this, real estate marketplace Point2 Homes analyzed historical data on market trends, delving into numbers from 2008 and 2018. The specific metrics used were median home price, median income and homeownership rate.

Here are the key findings:

  • The average American’s median income increased 18% since 2008, while home prices grew 24%
  • Home prices in Canada increased by a much larger margin (56%), with median income only going up 15%
  • The US had lower inflation than Canada, with the Canadian Dollar currently at 75% of its ’08 value against the US Dollar

Every American remembers the housing bubble bursting in 2008 and the ensuing recession that scarred many of us. In Canada, the housing bubble hasn’t burst yet, and price increases have been outpacing the US for some time now. While China’s speculative bubble and the 2014 oil price crash made the Canadian economy hiccup, they didn’t have the effect that the Great Recession had on the US.

 

US Homeownership Down Over 5% Since 2008

At 64.2%, the US homeownership rate is down 5.3% in the last decade. While median income has increased 18% since 2008, median home prices have outpaced it, increasing 24% over the same period. Many are finding that rising prices and interest rates are proving to be quite the barriers to overcome in the search for the American Dream.

Over the northern border, Canada’s home prices have increased a whopping 56% in the last decade, outpacing median income, which rose a meager 15%. Homeownership is still strong in Canada, currently only 2% below 2008 figures. However, after the oil price crash of 2014, it dropped 1.2% which is the first decline Canada experienced in almost 50 years.

 

Rental Prices Increase Over 20% in Both Countries

Since homeownership is decreasing in both the US and Canada, renting is seeing a correlating rise, with rates increasing 23% and 25% respectively.

RENTCafé.com shows cities like San Francisco, New York City, Vancouver and Toronto are way above their respective national averages. Rents in Manhattan ($4,119 USD) are four times the national average, while San Francisco ($3,590 USD) and Boston ($3,379 USD) are both over three times the national average. By comparison, at around double Canada’s national average, Toronto and Vancouver are the most expensive cities at $2,000 CAD—which is still less than half the likes of San Francisco and Boston.

Markets Showing Signs of Overheating

While the bubble has yet to burst in Canada, all the risk factors are there. Interest rates are still rising, and lending practices still involve adjustable mortgage rates, 5-year balloon payments and an increase in sub-prime loans. Increased global market volatility due to trade tension between China and the US could be the pin that pops the bubble.

The US has just posted the strongest back-to-back quarters of GDP growth in four years, and the lowest unemployment rate in almost half a century at 3.7%. While these numbers all sound great, the increased housing prices and decreasing volume of transactions may be signaling an over-heating of the markets. The Fed is raising interest rates to curb inflation, which makes borrowing money more expensive and may ease the rate at which housing prices are increasing.

Given the numerous variables at play, it’s difficult to say what will happen in the future, but things seem to be a bit rosier south of the border.

Patrick McGregor

Patrick McGregor

Patrick McGregor is a senior writer at CommercialCafe, covering the real estate industry and overall economic trends in the United States. He also holds an MBA from Thunderbird School of Global Management. Before joining CommercialCafe, Patrick was a commercial real estate analyst at Yardi Matrix for five years.