Canadian & US Real Estate Affordability Improved, Still Near Record Lows: BMO 

Canadians and Americans may be more alike than they want to admit—especially when it comes to housing. A new report from BMO Capital Markets finds falling prices and cheaper credit have pushed housing affordability to a multi-year high. Still, the bank warns both markets remain near multi-generational lows and have a long way to go before anything resembles normal. 

Canada & US Real Estate Affordability Is Improving—Kind of

BMO compared affordability in both countries using a similar concept: the share of income a median household needs to spend to carry the cost of a typical home purchase. The measures differ slightly in the presentation. In the US, the NAR Housing Affordability Index defines 100 as affordable, with higher values showing better affordability. In Canada, the Bank of Canada (BoC) Housing Affordability Index shows the income share required—so a reading of 35% means a household spends 35% of its income on housing. 

BMO normalized both indexes for easier comparison. Canada’s data was flipped (right axis) so a rising line indicates improving affordability in both countries. The blue horizontal line marks each country’s 40-year median, highlighting how far both remain from historical norms. 

“Affordability is improving, but from levels that are still extremely strained in both countries,” explains BMO chief economist Douglas Porter. 

US Housing Affordability Nears 3-Year High—Still Near 80s Lows

BMO notes that American housing affordability has improved slightly in recent months. The NAR Housing Affordability Index is now at one of the best levels in 3 years, but affordability remains near the weakest readings since the late 1980s—worse than at the peak of the 2008 bubble. The rebound is largely optical, as the income-to-price ratio shows little real change.

“US housing affordability inched higher in the latest month to one of its better levels of the past three years—but it’s still quite weak,” explains Porter. “Even with the uptick, it’s still close to the lowest ebb since the late 1980s.”

Source: BMO Capital Markets; NAR; Bank of Canada.

Canadian Housing Affordability Sees Sharp Improvement, Remains Slightly Better Than 90s Bubble

Canada has also seen a sharp improvement, driven by falling home prices and policy-driven rate cuts. The chart shows affordability has improved nearly 10 points since 2024, but it still remains near the worst levels on record. Current readings are only slightly better than the early 1990s—largely due to cheaper financing. The recovery is also somewhat deceptive: US borrowers can lock in mortgage rates for the life of the loan, while Canadians typically renew every five years, often facing a rate shock.

“The combination of lower home prices and the big rate cuts has helped, but things aren’t ‘normal’ yet. It will likely require some time for incomes to rise, prices to drift (yes, possibly lower yet), and probably slightly lower rates to restore affordability,” according to Porter. 

Both markets are now in a post-boom phase, with affordability still hovering near historic lows. Even after one of the sharpest interest-rate easing cycles in modern history, progress has been marginal—underscoring deeper structural issues with income growth and housing costs.