What’s the Forecast for the Spring Market?

A blog post on a Thursday? Well, its your lucky day.

We’re a day early with the blog because of the Easter Long weekend.

So let’s hop right in:

In the year 2020, a noteworthy shift was observed as 34% of Canadians attained mortgage-free status, marking a slight decrease from the figures of 43% in 2016 and 46% in 1999. This trajectory over the past 21 years reflects the challenges faced by Canadians in saving and fully paying off their mortgages, despite experiencing growth in earnings.

This narrative sheds light on the evolving homeownership landscape.

A deeper dive into the changing dynamics of homeownership in Canada shows the average equity that homeowners hold in their houses. It is fascinating to note that approximately 74% of all household debt in Canada comprises residential mortgage debt, contributing significantly to the accumulation of net worth. In contrast, 16% stems from lines of credit, while only 4% is attributed to credit card debt. What will be interesting to see as the next tranche of statistics becomes available is how these numbers are changing post Covid and as a result of the economic conditions.

Moreover, Canadians exhibit a considerable amount of equity in their homes, with an average ranging between 73% to 78% of the home's total value. This data underscores the substantial financial stake that homeowners hold in their residential properties, indicating a robust foundation for financial security and wealth accumulation. The challenge for the economy is that this money/wealth is considered dead money in the respect that it is not actively engaged in the economy - it’s not creating new jobs, demand, or improving productivity.

So how much equity, on average, does a homeowner have in their home in Canada?

74% of all household debt in Canada is made up of residential mortgage debt which helps increase net worth, while 16% comes from lines of credit, and only 4% is credit card debt.
Canadians have significant equity in their home, averaging about 73 – 78% of the home’s value.

Approximately, 35.5% of Canadian homeowners have a mortgage. This was a slightly bigger portion of the homeowners compared to the same period in 2021 when 29.63% had mortgages. Canadians aged 35-54 are the most likely to have a mortgage on their home.

Among Canadian homeowners, millennials were most likely to have the largest mortgages, having often purchased their homes more recently. According to the census from 2021, millennials homeowners paid on average $2,124 per month on their mortgages. which is in line with what rental rates were in the early 2020’s.

When the current round of mortgages renew in early 2025, the prediction is that the average monthly mortgage payment will balloon to over $3,000. What this means for the 35%+ of homeowners with a mortgage is still being debated.

Outcomes could range from being negligible to having a hurricane effect on the economy, as many of these homeowners may not be able to sustain their new payments or qualify for the renewal rate.

As of the end of Q3 2023, delinquency rates across Canada, and Ontario in particular, have not shifted significantly. On average Canada-wide, 0.15% of mortgages were classified as delinquent. Ontario was sitting at 0.10% and the KW region was at 0.06%.

For those that are sitting on the sidelines expecting a flood of listings to hit the market because of delinquencies, the wait may have to be into Q2-Q3 of 2025 - and that will depend on where rates are then and how the 40% of people with mortgages handle the renewals.

Long story short - if you can afford to buy comfortably today, you need to decide if it makes sense to put life on hold to see if the event plays out like the doomsayers predict.

For a lot of people, putting life on hold for a year may not make sense.

There’s a lot of factors to consider in this market. The best advice I can give is to talk to an agent you trust, get the data and decide what works best for you.

Thanks for reading.

Enjoy the weekend & Happy Easter!

Paul Fitzpatrick

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