Canadian Home Builders Association Q2 Housing Market Index Points to Lower Housing Starts and Sales Outlook

On Thursday, the Canadian Home Builders Association (CHBA) released the results of its Q2 Housing Market Index (HMI). The HMI showed further deterioration in builders’ sentiment across key regions after a disappointing Q1 HMI report.

CHBA says that the broadly negative view about the health of new-home sales indicates that housing starts activity, at least for homeownership, will not pick up substantially any time soon. Record lows for the HMI in Ontario and British Columbia are particularly worrisome, given that these provinces are facing the greatest affordability challenges and have the largest need for much more housing supply. What’s more, the full effects of the slowdown have yet to be felt in housing starts numbers because of long building timelines, especially for multi-family buildings.

The HMI is a sentiment indicator that assesses current selling conditions, expectations for selling conditions over the next six months, and the level of sales office traffic (or other measures of prospective buyer interest). As such, it is a proven indicator of expected housing starts six months and beyond, according to CHBA.

The single-family HMI recorded a score of 29.9 (out of 100), 5 points lower than Q1 and 10 points lower than 2023Q2. The Q2 multi-family HMI score is 32.5, 5.4 points lower than in Q1 and 8.5 points lower than 2023Q2.

CHBA notes that the most troubling is that sentiment in Ontario and British Columbia reached new record lows, signaling a worsening housing supply deficit to come in two key provinces where affordability is most dire and most in need of new supply. For Ontario, record lows of 11.6 (out of 100) for both the single- and multi-family HMI point to severe drops in housing starts ahead, and a worsening deficit in housing supply. BC is not faring much better, with a single-family HMI of 17.8 and a multi-family HMI of 32.5.

As a result, nationally, 48% of HMI respondents stated that they are building fewer units than they otherwise would have as a result of challenges with mortgage qualifications for their customers, and 22% have stated that lack of sales has led to the cancellation of projects. Overall, 61% of respondents expect to have an average of half the number of starts this year compared to 2023.