Low builder confidence improves slightly, but lack of buyers still hurting overall industry sentiment and housing starts
OTTAWA – August 9, 2023 – The Canadian Home Builders’ Association (CHBA) released the 2023 Q2 Housing Marketing Index (HMI) today, which saw both single- and multi-family indexes remain low but increase slightly once again this quarter, improving from the lows recorded in Q4 2022. A pause from the Bank of Canada on increasing interest rates between late January and June of this year, allowing buyers time to adjust to the new financing environment, along with the spring buying season, was supportive of improvement in builder sentiment, though the June and July interest hikes will no doubt keep improvement muted.
Despite the slight rise, both indices remain downbeat (below a value of 50) and well below the single family and multi-family highs pushing 90 last year prior to the start of interest rate increases (Q1 2022). The Q2 CHBA HMI for single-family builders registered 39.9, 5.6 points above 34.3 recorded in Q1. The multi-family HMI in Q2 was 41.0, up 7.5 points from 33.5 in Q1.
While the spring busy season helped prospective new home sales traffic somewhat, affordability challenges related to interest rates and construction costs remain very much a concern, and have been compounded by the July rate hike by the Bank of Canada shortly after Q2 survey data was collected. Converting prospective buyers into sales remains a challenge, as do closings from previous sales. Due to the high interest rate environment, nearly half of CHBA’s panelists reported that buyers are requiring alternative lending solutions and one third said they are needing to make accommodations for some buyers so they can close.
At the same time, fewer sales means less new construction, and the concern regarding the shortage of housing in Canada is increasing. 67% of CHBA’s expert industry panelists stated that the slowdown in the market is causing them to build fewer units, deteriorating further from the 59% reported in the previous two quarters. 22% said that the slowdown is causing them to cancel projects entirely.
“We need to build 5.8 million homes within the next ten years to close Canada’s current housing supply gap. Current conditions – with construction costs rising, labour shortages, and especially the current financing conditions – are preventing that from happening. Canada needs a holistic approach to increasing housing production. There are measures the federal government can take to offset the impact of high interest rates on new home construction, and they need to be taken; all levels of government need to take action to remove barriers and support more housing supply,” said CHBA CEO Kevin Lee.
For more information on CHBA’s HMI, including the detailed methodology and key takeaways, please visit the official CHBA HMI webpage.
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MEDIA INQUIRIES
Journalists wishing to interview Kevin Lee, Chief Executive Officer of the Canadian Home Builders’ Association are encouraged to submit their request by email to media@chba.ca.
About the HMI
CHBA’s HMI provides a leading market indicator for both the single-family and multi-family markets in Canada, before permits and starts. Released on a quarterly basis, the HMI provides insight into the industry, including many of the issues that are affecting housing affordability, with a strong correlation to future housing starts. The data for the CHBA HMI comes from an exclusive panel of hundreds of CHBA homebuilders and developers from coast to coast. Every quarter, this panel responds to a series of questions about market conditions. CHBA then uses proprietary statistical analysis to prepare the quarterly HMI. In addition to the standard HMI questions, each quarter CHBA asks “special questions” that allow the Association to gather data and insights into current issues affecting the industry across the country.