Housing affordability dips slightly in the first quarter of 2012

It became a little tougher, budget-wise, for many Canadians to carry the costs of owning a home in the first quarter of 2012, according to the Housing Trends and Affordability Report from RBC Economics. This dip in affordability was an effect of vigorous housing demand in the early stages of 2012, rather than the cause of any kind of slowdown in the market and was largely taken in stride by homebuyers.

Mild winter weather in most of Canada and time-limited mortgage rate ‘sales’ by financial institutions likely motivated homebuyers. Because the mortgage sales took place during only a few weeks, however, average mortgage rates during the entire first quarter fell just slightly, thereby providing only a small direct benefit to affordability for the second straight quarter.

All housing types saw a small erosion in affordability
At the national level, housing affordability eroded modestly for all three categories that we track. The RBC® Housing Affordability Measures rose by 0.8 percentage points to 43.1% for detached bungalows, by 0.5 percentage points to 48.7% for two-storey homes, and by 0.3 percentage points to 28.8% for condominium apartments (an increase represents a deterioration in affordability). The measures stand slightly above historical averages in all cases, indicating that there is only modest affordability stress being exerted on Canadian homebuyers at the moment.

Rising interest rates will pose further affordability challenges
Looking ahead, further challenges on the housing affordability front in Canada are expected once the Bank of Canada begins returning interest rates to more “normal” levels in the fourth quarter of this year, assuming that the European situation does not become more problematic.
RBC mortgage specialists understand the challenge of balancing lifestyle needs and housing affordability. Whatever your client’s specific circumstances or concerns, I provide tailored advice on all aspects of financing a home purchase and will give your clients the confidence to take the next step in their goal of home ownership.