Housing Affordability Improved for an 11th Straight Quarter — So Why Doesn't It Feel Like It?

What the Bank of Canada's affordability index actually measures

The Bank of Canada tracks a Housing Affordability Index: the share of an average household's disposable income needed to cover the mortgage payment and utilities on a home purchase, using a rolling six-month average of resale prices. A higher number means less affordable; a lower number means more.

In the second quarter of 2026, that index fell 0.8 percentage points to 41.3%, according to Bank of Canada data reported by Better Dwelling. It was the 11th straight quarterly improvement and puts the index 2.4 points below where it stood a year earlier.

How far the recovery has come — and how far it hasn't

The improvement since the recent peak is real: the index has dropped 13.2 percentage points from 54.5% in the third quarter of 2023, one of the sharpest corrections in the data's history. Falling home prices, two years of lower borrowing costs and real income growth all did their part.

That comparison to 2019 matters more than the comparison to the 2023 peak. A market that was already considered a stretch for most households before the pandemic is still, by this measure, further from normal than it was then — even after the longest improving streak on record.

Why economists say there's only one lever left

BMO Capital Markets chief economist Douglas Porter laid out the arithmetic in a research note reported by Better Dwelling: there are exactly three ways this index can keep improving — incomes can keep growing, prices can keep falling relative to income, or borrowing costs can come down further. Porter's team argues the third option looks unlikely given the Bank of Canada's current stance, and the first moves too slowly on its own to close a gap this size.

That leaves prices carrying most of the remaining adjustment. Porter's note pointed to a roughly 20% decline in national home prices from the 2022 peak as the main driver of the improvement so far, alongside the earlier cuts to borrowing costs and steady income growth — and flagged that valuations in several markets remain stretched enough that further softening wouldn't be surprising.

The national number hides an Ontario-and-B.C.-shaped correction

Better Dwelling's coverage of the BMO note flagged that the national price decline is not evenly spread. Ontario and B.C. account for most of the correction behind the improving affordability numbers; most other provinces have seen prices hold near, or return to, all-time highs over the same stretch.

For an Ontario buyer, that framing cuts both ways. It means the province has already absorbed a larger share of the adjustment than most of the country — and it means a national headline about affordability improving is describing a market that looks more like Ontario's than most other provinces', not less.

What this actually means if you're weighing when to buy

None of this tells you what will happen to any specific home in Waterloo Region or southwestern Ontario next quarter — a national index built from six-month rolling averages moves slower than any single local market. What it does tell you is that the easy part of the recovery, the part driven by cuts to borrowing costs already made, is largely behind us.

• Waiting for borrowing costs to fall further is not the same bet it was two years ago — the Bank's own commentary points the other way for now.
• A further price adjustment, where it happens, tends to show up unevenly by neighbourhood and property type, not as a uniform national shift.
• The more reliable move is running your own numbers against today's terms rather than a hoped-for future one — our affordability calculator uses your actual income and debts, not a national average.