The US and Canada endured a historic economic downturn. The two neighbours faced a once-in-a-century global health pandemic. Washington and Ottawa broke the budget to cushion the economic blows from the COVID-19 public health crisis. Despite these factors, the US and Canadian housing market were both red hot in 2020 – and real estate experts anticipate comparable growth in 2021.

But is one real estate market more affordable than the other? This can be a challenging question to answer, since the two nations have unique tax policies, cultural nuances, inventories, financial products (mortgage-backed securities, for example), economic conditions, and a myriad of other crucial differences. These elements can impact the cost of owning a semi-detached property in a rural community or a two-bedroom condominium in a major urban centre.

The other factor has been the exchange rate between the US dollar and the loonie. Despite soaring at the height of the coronavirus pandemic, the US dollar has come back down to earth, and the loonie has stabilized in recent months. Today, there is about a 20-per-cent gap in the USD/CAD currency pair, so that needs to be considered when comparing affordability across national housing markets.

Overall, the US and Canadian real estate markets have been one of the bright spots in a year otherwise mired in destitution and despair. But let’s compare affordability and the broader performance of the hottest and coolest housing markets in Canada and the US.

An Affordability Comparison Between the US and Canadian Housing Market

In order to judge affordability, you need to compare the biggest and cheapest markets in the United States and Canada. In this case, Canada’s most expensive market is Vancouver and America’s most exorbitant real estate area is San Francisco – both west-coast urban centres.

The average benchmark price of a home in Metro Vancouver is $1.06 million, which requires an annual income of around $160,000. The median listing price for a San Francisco home is $1.3 million, demanding an annual income of more than $300,000.

Now, what about the cheapest housing markets among city centres?

In Canada, the total average sale price of a home in Regina, Saskatchewan is around $300,000. South of the border, the most affordable real estate market in a metropolis is Detroit, Michigan with the median listing price at $70,000. In each market, there is a gap in how much annual income you need. In Detroit, an income of around $20,000 would suffice. In Regina, it would be about $50,000.

Canada Outpaces US Since Great Recession

Since the second quarter of 2006, Canadian real estate prices have skyrocketed compared to the US housing sector. According to the US Federal Reserve, an inflation-adjusted index of Canadian real estate prices compared to the US highlights a chasm over the last 15 years.

In the first quarter of 2020, Canadian real estate prices advanced 29 times the rate of American home prices. This was attributed to the diverse array of fiscal and monetary policies employed by Ottawa since the Great Recession.

Although Washington has also employed various measures to facilitate home ownership, these efforts are still outweighed by public policymakers north of the border. These interventions have contributed to the rapidly advancing Canadian real estate prices.

Will US Politics Alter the Canadian Housing Market?

The US is coming off a raucous election cycle. Former Vice President Joe Biden was declared the winner, and his administration will preside over a Democrat-controlled Congress and a Republican-controlled Senate. Since the two economies are interconnected in many ways, anything that happens politically can have lasting consequences in Canada.

Canada has long been a desired nation for many homebuyers south of the border, and this has had a substantial impact on the housing sector. Of course, the coronavirus pandemic changed immigration protocols, but once conditions normalize, Canada could benefit from an injection of immigrants with capital – both American, and from overseas.

Border closures could certainly impact Canada’s housing market, “but I’m not sure that this is going to be a long-term effect in Canada,” said Christopher Alexander, Chief Strategy Officer and Executive Vice President at RE/MAX of Ontario-Atlantic Canada, in a recent interview on BNN. “We’re continuing to attract people. Yes, travel has been restricted and it’s been more difficult to move freely around the world, but as the United States continues to get stricter on its immigration rules, Canada is going to become even more appealing. While 2020’s [immigration] numbers are way down, we expect that once travel resumes and people can move freely, that number will tick back up again.”

America’s loss is Canada’s gain?

Real Estate in 2021

As the global economy recovers, real estate experts anticipate surging housing prices in 2021 (and beyond) within both of these North American nations. All the factors support this hypothesis, from record-low interest rates to pent-up demand, and a broader economic recovery. The other factor that is not often discussed is the substantial increase in savings accumulated during the lockdowns and restrictions, to the tune of tens of billions of dollars in a year, which could be unleashed onto the economy and in the real estate market. This could be the difference-maker between a hot housing sector and a red-hot one.