As homebuyers grapple with an affordability crisis and more interest rate hikes likely on the way, the downturn in the housing market is not done yet, a new report from RBC Economics says.

"We think the bottom is still some ways away," Robert Hogue, assistant chief economist at RBC Economics, said in a client note on Thursday.

"Buyers are in an exceptionally tight squeeze, facing the worst affordability conditions ever in large parts of the country. They're clearly on the defensive at this stage."

The Bank of Canada has hiked its key lending rate by three percentage points since March, and it's widely expected to deliver an additional three-quarter-point increase by the end of the year, ultimately lifting its overnight rate to four per cent. While higher rates have hammered home prices, the improvement in affordability for buyers has been offset by rising mortgage rates.

"The negative impact of higher interest rates on prices is still running its course, depressing the values of (higher-priced) single-detached first and foremost," Hogue said.

Despite the general weakness in real estate across the country, there are still some regions, like Calgary, that are bucking the trend, he added.

Calgary's housing market has been ravaged in recent years by the double whammy of the pandemic and the downturn in the oil and gas sector, weighing on home sales and prices. But it has now become a stand out market as more Canadians search for affordable housing. Home resale activity in the city remains above pre-pandemic levels.

"Alberta's stronger economy, the rebound in in-migration and Calgary's relatively favourable affordability undoubtedly continue to stoke housing demand at this stage," Hogue said.

Alberta has been touting its relatively affordable way of life as a way to lure residents from other provinces – a tactic that appears to be working, according to the latest Statistics Canada data.

Some 10,000 people moved to Alberta from other provinces in the second quarter, the data showed, with more than half of those people coming from Ontario.

One of the biggest incentives was Alberta's affordable housing market, Mike Moffatt, a senior director at the Smart Prosperity Institute, recently told Yahoo Finance Canada.

Meanwhile, the downturn in Greater Toronto Area real estate is affecting different property segments in different ways.

Single-family homes are bearing the brunt of the downturn, while demand for condos is being underpinned by their lower prices and investors looking to take advantage of the frenzied rental market, Hogue says.

In Vancouver, the slide in home prices appears to be moderating, but it's been of little help to buyers.

"We expect excessively poor affordability and the prospects for higher interest rates to keep buyers on the defensive and drive prices lower still in the period ahead," Hogue said.

RBC estimates it would take 90.2 per cent of the median household income in Vancouver to carry a home in a September report – the highest out of all major markets tracked in the report.

In Montreal, the correction in the housing market has been accelerating, particularly on the Island of Montreal, as higher borrowing rates take an increasing toll on buyers, Hogue says.

"Island prices are now below year-ago levels. We see little that would alter the market's trajectory in the coming months, especially with more interest rate hikes likely to weigh on buyers," Hogue said.

With additional reporting from Alicja Siekierska

Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.

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