Why debt is still a four-letter word for housing markets

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Mortgage debt, on the other hand, increased in most cities, but declines were more pronounced in provinces already struggling with economic growth even before the onset of the pandemic. Thus, Calgary, Edmonton, Regina, Saskatoon and Winnipeg reported the largest declines in mortgage debt.

The total outstanding debt increased in only four urban regions: Abbotsford-Mission, B.C., Hamilton, Toronto and Vancouver. Abbotsford and Hamilton lie within the commuter shed of Vancouver and Toronto, respectively, where housing prices rapidly increased before the pandemic. This suggests that the increase in total outstanding debt was concentrated in and around the Toronto and Vancouver areas.

The CMHC report also noted that changes in mortgage debt levels are not explained by the decline in employment. The three cities reporting the highest increase in mortgage debt levels also reported higher-than-average declines in employment growth. This led CMHC to conclude that “changes in employment were not a clear factor in the changes in mortgage debt since the onset of the COVID-19 pandemic.”

The disconnect between employment growth and mortgage debt levels suggests that job losses have increasingly spared homeowners, and likely disproportionately impacted renter households. The record year-over-year increase in sales during summer and fall in large urban centres suggests that employment uncertainty has not dampened housing aspirations of current and future homeowners.

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