Canadians Still Pay 62% More for a Home Than in U.S.
The price gap between homes in Canada and the United States remains “yawning” despite the changing fortunes of the two real estate markets, but that’s bound to change.
The U.S. housing market, where the financial crisis began, has been on the upswing after years of depression, while the Canadian market has cooled over the past several months as policy makers try to engineer a soft landing, which, by all appearances, appears to be working.
Home sales have plunged in Canada, but prices have generally held up.
BMO Nesbitt Burns compared the two markets, and found that, while U.S. prices surged on an annual basis to March, average prices in Canada remain a “towering” 62 per cent above those in America.
“That’s right in line with last year’s average gap, but compares with little difference for a 25-year period up until 2006,” said BMO chief economist Douglas Porter.
“There’s nothing in the textbooks that says prices have to be identical between Canada and the U.S., especially in their own currencies,” Mr. Porter said in a research note.
“But a 62-per-cent gap is simply not sustainable for long,” he added.
“The good news is that we believe that most of this yawning gap will be closed by a rebound in U.S. home prices. After all, it’s U.S. affordability that’s off the charts now.”