The Canadian Home Builders’ Association (CHBA) Housing Market Index (HMI) underscores the urgent need for more housing in Canada, despite growing concerns among builders about industry conditions. The HMI signals that a shift in policy and financial systems is necessary to stimulate increased housing supply.
Housing starts are expected to decline in 2024, given the unprecedented 28.5% surge in mortgage interest costs in 2023—the highest annual increase on record. The residential construction sector, sensitive to interest rate fluctuations, faces a challenging outlook due to sustained interest rate hikes. This situation highlights the need for significant changes to boost housing starts and capacity in the coming years.
The HMI has reached a record-low level, with single-family builder sentiment at 24.6 and multi-family HMI at 29.1. In 2023, 64% of builders constructed fewer homes due to high interest rates, and 30% had to cancel projects. Higher construction costs and interest rate impacts on affordability are causing concern for builders, with around 36% anticipating even fewer starts in 2024.
CHBA CEO Kevin Lee emphasizes that high interest rates are impeding the feasibility of building much-needed new housing supply, a trend observed in 2023 and expected to persist in 2024. To address this, Lee calls for focused and coordinated housing policies at all levels of government, suggesting immediate measures like introducing 30-year amortizations for insured mortgages on new construction homes and lowering the mortgage stress-test qualifying rate.
In summary, the CHBA HMI highlights the need for policy and financial changes to address industry concerns and stimulate housing supply in the face of rising interest rates and construction costs. The low HMI levels signal a challenging outlook for the residential construction sector, emphasizing the importance of coordinated government efforts to improve affordability and supply.
