After years of strained affordability, Canadian homebuyers are finally seeing a shift—though it’s not quite the relief many were hoping for. While housing is technically less unaffordable today than it was during the peak of the last three years, that doesn’t mean it’s within reach for the average buyer.

Affordability Gains, But at a Cost

Recent data highlights that the overall cost of homeownership has improved slightly, largely due to falling home prices and interest rates. This rare convergence has opened a short-term opportunity for buyers to negotiate more favorable deals. In Toronto, for example, condo prices have rolled back to pre-pandemic levels, and five-year fixed mortgage rates are now hovering in the low-to-mid 4% range.

Yet affordability remains a relative term. In key markets like Vancouver and Toronto, the share of household income required to cover ownership costs still far exceeds sustainable levels. In contrast, cities like Edmonton and Calgary present a more viable picture, with ownership expenses sitting closer to national benchmarks.

A Market Out of Balance

Even as rates cool and prices drop, the broader economic picture remains complicated. Canadian households continue to carry the highest debt-to-income ratio among G7 countries—nearly $1.85 owed for every dollar earned. This financial strain limits borrowing power and keeps many potential buyers sidelined.

There’s also a growing gap between real income and housing costs. The Real House Price Index shows home values are still wildly outpacing disposable income, pointing to a fundamental imbalance in the market.

A Shift in Supply and Sentiment

Developers are beginning to pull back. In the GTA, pre-construction condo inventory has ballooned, and many projects are either paused, canceled, or repurposed for rentals. If this trend continues, it could trigger a new supply crunch in the next year or two.

Meanwhile, the broader economy is showing signs of softening. National unemployment rose to 7% in May, with youth unemployment reaching a decade high. Wage growth has slowed, and inflation remains sticky—leaving the Bank of Canada cautious about further rate cuts.

Renting Gains Stability

While the ownership market flounders, rental trends are stabilizing. National rents dropped for the eighth straight month in May, providing short-term relief for Canadians priced out of homeownership.

What Buyers Should Know

The current market presents a narrow window of opportunity. Prices have softened. Rates have eased. Buyers have room to negotiate. But with high household debt, sluggish wage growth, and declining construction activity, these conditions may not last long.

Unless income growth accelerates or prices drop further, long-term affordability will remain elusive—especially in major metropolitan areas.