House Price-to-Income Ratio

Canada vs US house price to income: a tale of two crashes that didn't happen the same way

The starkest single fact: in 2005, the United States had a house-price-to-income ratio of about 128 on the OECD index (2015 = 100), while Canada was at about 79. Twenty years later the lines have crossed. The US ratio went through a brutal 2007–2012 crash and recovery and now sits at roughly 126. The Canadian ratio rose almost continuously to a peak of approximately 151 in Q2 2022 and has since corrected modestly to about 129 by Q4 2025. The Cleveland Fed published a research paper in 2023 — "Why didn't Canada bust?" — asking exactly the right question: why a market that looked just as overvalued as the US in 2007 took a completely different path through the 2008 cycle. This page is about both halves of that story.

For the indicator definition (residential property prices divided by gross disposable income per capita, OECD index 2015 = 100) see the House Price to Income indicator page. This page is about the Canada–US trajectories.

The numbers

From the OECD index series shown above:

• United States, 2005: about 128.24
• United States, Q1 2012 trough: about 89.29 — a 30%+ peak-to-trough collapse on the index
• United States, Q2 2022 peak: about 134.53
• United States, Q3 2025: about 126.43
• Canada, 2005: about 78.88
• Canada, Q2 2022 peak: about 151.16 — the highest reading among all major OECD economies
• Canada, Q4 2025: about 129.08

In dollar terms, the Canadian Real Estate Association's November 2025 release showed the average Canadian home price at approximately CAD $682,219, while the US National Association of Realtors reported a US median single-family home price of approximately USD $420,600 in the same window. The gap on a per-capita-income-adjusted basis is what the OECD index captures, and Canada is structurally more expensive by every comparable measure.

Why the US crashed and Canada didn't

This is the question the Cleveland Fed asked in 2023 and which Canadian regulators have been trying to answer for fifteen years. The standard explanation has several parts:

1. Underwriting standards: Canadian mortgage underwriting was tighter than US underwriting in the 2003–2007 boom. There was no Canadian equivalent of NINJA loans, subprime ARMs, or the "originate and sell" pipeline that fuelled the US mortgage-backed securities market.
2. Insured high-LTV mortgages: CMHC mortgage insurance is mandatory for high loan-to-value mortgages in Canada and is backed by the federal government, which kept default risk concentrated in a regulated insurer rather than dispersed through the shadow banking system.
3. Recourse: most Canadian provinces have full-recourse mortgages, meaning a borrower remains liable for the deficiency after a forced sale. US mortgages in many states are non-recourse, which incentivized "jingle mail" walkaways during the 2008–2010 crash. This is the largest behavioural difference.
4. Bank concentration: the Canadian banking system is dominated by six large, well-capitalized institutions that did not need TARP-style bailouts and could continue to lend through the cycle.
5. Population growth: Canada's much higher immigration rate continued to underwrite housing demand through the post-2008 period in a way US demand did not.

The price was that the Canadian housing cycle never reset. Where the US ratio fell roughly 30% from peak to trough on the OECD index, the Canadian ratio kept rising. By the Q2 2022 peak, Canada had the highest house-price-to-income ratio among all major OECD economies. Demographia's 2025 International Housing Affordability report ranked Vancouver 11.8 on a multiple of median household income — the fourth least affordable major market in the world, ahead of London, New York, and almost every other comparable city.

The income side: real wages have not kept up

The other half of the ratio is income, and Canadian real disposable income per capita has been broadly flat for years — the same story as the GDP per capita gap. RBC Economics' housing affordability index, published quarterly by Robert Hogue's team, hit 53.2% in Q3 2025 — meaning the typical Canadian household needs 53.2% of its pre-tax income to carry the costs of an average home. Vancouver and Toronto are in the 80%+ range. TD Economics' Beata Caranci has called the affordability situation "the worst on record by a meaningful margin" and the bank's forecasts assume affordability remains stretched well into 2027.

The supply gap

The CMHC's June 2023 update to its housing supply estimate — and the affirmation in subsequent CMHC reports — found that Canada needs to build approximately 3.5 million additional housing units above the current pace by 2030, on top of the roughly 1.5 million already projected. That's a total target of about 4.8 million units through 2030, requiring sustained annual completions of 430,000–480,000 units, against an actual pace closer to 250,000 in 2025.

Mike Moffatt at the Missing Middle Initiative (Smart Prosperity Institute) has been the most prolific academic voice on the supply side, arguing that the post-2008 collapse in starts of "missing middle" housing — duplexes, triplexes, low-rise apartments — combined with restrictive municipal zoning is the central cause of the affordability crisis. His policy prescription, which became the intellectual basis for the Carney government's Build Canada Homes program (announced September 14, 2025, with an initial CAD $13 billion envelope), is to attack zoning at the municipal level while building public homes at scale.

Provincial zoning reform: the bright spot

The 2024 and 2025 wave of provincial and municipal zoning reforms is the most significant supply-side change in a generation:

• British Columbia, Bill 44 (2023, in effect from mid-2024): legalized small-scale multi-unit housing province-wide on most single-family lots.
• Edmonton zoning bylaw renewal (2024): legalized up to eight units on all residential lots without rezoning.
• Toronto multiplex permissions (expanded 2024): up to four units as-of-right on residential lots, now being expanded to six in transit corridors.

These reforms are too recent to show up in the price data but they are the most credible structural response so far. The independent housing analyst Ben Rabidoux at North Cove Advisors has tracked the early starts data and reports modest but real upward momentum in multiplex completions through 2025.

The federal response

In addition to Build Canada Homes, the Carney government extended the foreign buyer ban through 2027, introduced a new GST rebate on first-time-buyer purchases in Budget 2025, and committed roughly CAD $13 billion in initial Build Canada Homes funding. The 30-year amortization for insured first-time-buyer mortgages was reintroduced, which slightly improves monthly carrying costs while leaving total interest higher.

The Bank of Canada has its own piece of the response. Cuts of 275 basis points from the 2023 peak — see prime rate — have eased mortgage carrying costs, but BoC officials have been clear that monetary policy cannot solve a structural supply shortage. Robert Hogue at RBC has been saying the same thing in plain English in his quarterly affordability reports through 2025.

Mortgage structure: the 30-year vs the 5-year

A subtle but important point: US mortgage transmission to consumer affordability is much slower than in Canada because the standard US mortgage is 30 years fixed. When the Fed cuts rates, existing US borrowers see no immediate change, and only new buyers and refinancers get the benefit. In Canada, the standard mortgage resets every 5 years or less, so BoC rate cuts pass through to affordability much faster — but rate hikes also pass through faster, which is why the 2022–2023 hiking cycle was so painful for Canadian borrowers and why Canadian household debt is more sensitive to monetary policy. See household debt to GDP for the full version of that story.

What the gap does and does not mean

It does mean:

• Canadian housing is the least affordable in the G7 by every comparable income-adjusted measure.
• Canadian household balance sheets are heavily exposed to real estate as a share of total wealth.
• Canada has a structural supply shortage that 2024–2025 zoning reforms are trying to address but have not yet reversed.

It does not mean:

• That a US-style 2008 crash is imminent. The structural reasons Canada didn't bust in 2008 — recourse, bank concentration, immigration demand, regulated underwriting — have not gone away.
• That all Canadian markets are equally stressed. Vancouver and Toronto are extreme; Calgary, Edmonton, and most Atlantic markets are much closer to their long-run trends.
• That US affordability is healthy. The US ratio is at its second-highest reading on record — just lower than Canada's.

What to watch in 2026

1. CREA monthly average prices and the OECD quarterly house-price-to-income index — the highest-frequency tracking.
2. CMHC starts and completions data. The supply target is 430,000–480,000 per year; the current pace is roughly half that.
3. Bill 44 BC and the Toronto/Edmonton multiplex data — does as-of-right zoning translate into actual completions?
4. RBC Economics housing affordability index (Robert Hogue, quarterly). Currently 53.2% nationally; Vancouver and Toronto in the 80s.
5. Mortgage arrears, especially in Toronto. CMHC's Toronto 90-day arrears at 0.26% (up from 0.06%) is the most-watched stress signal.
6. Build Canada Homes execution — the political credibility of the Carney response depends entirely on whether the early years of the program produce visible completions.

The stakes

House prices and incomes together determine the most consequential consumer good in the Canadian economy. The 30-percentage-point gap between Canada and the US is the single most visible legacy of the post-2008 divergence, and it is closely tied to the household debt gap, the productivity gap, and the GDP per capita gap. Mike Moffatt's argument that all four are linked through capital allocation — productive investment crowded out by real estate — is the most coherent integrating theory.

The short version: the US had a brutal housing crash, deleveraged for a decade, and is now back to a stretched but not crisis-level affordability. Canada never crashed, kept building debt, hit the highest affordability ratio in the OECD in 2022, and is now trying to grow its way out through zoning reform and a federal building program. The chart shows whether that strategy is working.