BMO Economist, Sal Guatieri, says that Canadian homeowners are spending more on their mortgages than ever before.

In a note from Monday, Guatieri revealed that Canadian families put just over 8% of their disposable incomes towards their mortgage payments in the second quarter. While that figure on its own may not seem remarkably high, Guatieri notes that it represents a “record share” of disposable income.

“While affordability is also at multi-decade lows in the US, less-indebted American households (many with still-low fixed mortgage payments) are spending a near-record-low share of income (4%) servicing their mortgage,” writes Guatieri.

“For Canada to have a reasonable chance of closing a widening chasm in living standards with the US, [besides] filling a deep productivity hole, it will need to build a lot more houses at a cost that most people can comfortably afford.”

Whether or not this is a realistic expectation is another matter entirely, particularly considering Canada’s “explosive population growth,” Guatieri continues.

“Meeting the supply challenge could prove intractable given a shortage of construction workers, though government policies to lower developer costs are starting to gain traction. The hope is that supply will increase before interest rates fall materially and spark another upturn in demand, which, in a supply-constrained market, would only feed higher prices and strangle affordability.”

Monday's note also includes some high-level forecasting, and warns that Canadian home sales, which have been down for the past three months, “are likely to stay down in the first half of next year.”

Meanwhile, home prices, which are down 10% from the early 2022 peak, could “sag” an additional 6% before the market “finds a footing,” Guatieri also says.

“Strength in a few regions, notably Alberta amid decent affordability and strong population inflows, won’t offset weakness in more expensive places such as Toronto, Vancouver, and much of Southern Ontario.”

While Guatieri says that the Canadian housing market would be “even colder” if not for healthy job and population growth, his overarching message is that the market is downcast and on track to stay that way well into the new year.

“Demand will stay depressed until the Bank of Canada cuts rates, possibly next summer. Don't expect a repeat of the spring fling,” he writes.