The true Canadian homeownership rate is…

The true Canadian homeownership rate is…

The true Canadian homeownership rate is… Homeownership in the U.S. is lower than it’s been since 1994. What’s the Canadian experience?

The Wall Street Journal reported last week that the U.S. homeownership rate hit 63.9%, its lowest level of ownership since 1994. To hit ownership levels below that you’d have to go back almost a decade to 1988 when Ronald Reagan left office.

This past year U.S. homeownership took a big hit down 120 basis points. The reason for the decline?

There’s been a significant increase in household formation as the economy strengthens and more young people finally leave the nest. With many of these people renting it lowers the overall homeownership rate. The U.S. hasn’t seen household formation this robust since 2005, a good three years before the financial crisis.

An interesting comment at the end of the WSJ article suggested (Zillow research confirms its authenticity) that the true homeownership rate in the U.S. — those without a mortgage on their home — is 29.3%. In total numbers that’s 20.6 million mortgage-free homeowners.

So, WP wondered about the Canadian experience. What’s our true homeownership rate?
Well, the stated rate is 69 percent according to CMHC’s 2011 statistics. In those stats CMHC found that Calgary had the highest homeownership rate by major metropolitan city at 72.4%. A separate study by Desjardins Group shows that Calgary homes are still more affordable than those in either Toronto or Vancouver. However,  that’s likely to take a hit if oil prices remain low.

Interestingly, the stated rate of 69 percent increased only marginally (60 basis points) between the 2006 and 2011. A lot of that has to do with immigration. 

But what about the true homeownership rate?

Well, on this front we’re also much better off than the U.S.  According to Statistics Canada’s 2011 National Household Survey, 41.4% of the 9.2 million owner households in this country were mortgage-free. That’s a huge difference over the American experience where interest deductibility seemingly keeps homeowners addicted to debt like heroin to a drug user. 

While the number of mortgage-free Canadians is fairly healthy at the moment, until interest rates go up and stock markets flounder, it’s unlikely that the true rate of ownership will move much beyond the low-40s.


Financial planner Kelly Ho explains that the current environment favors throwing money at your investments rather than your mortgage. “Let’s say you have a variable rate mortgage at 3 percent, and that’s high, and say you allocate money via an investment or savings vehicle that yields 5 to 6 percent over time; you’re already ahead.” 
  • Tim Affolter CFP CLU ChFC 2015-02-02 4:09:42 PM
    In regard to the high number of people who keep mortgages on their homes, the proliferation of HELOCs probably has something to do with it. I have clients with HELOCs who don't use them currently, but they are there for emergencies or opportunities. I believe those will still show up as a mortgage on the stats.

    I think we also need to think of proper asset allocation of total wealth when it comes to home ownership. The ancient advice to keep 25% of your wealth in each of the four major asset classes (real estate, stocks, bonds and commodities) is not followed very well these days. As a result of concentrating our wealth in our homes, we may experience higher volatility in our overall wealth than we should. A mortgage on your home might help to rebalance your wealth, providing that it is used for investment not lifestyle spending.
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