Erosion in affordability didn’t hinder activity as home resales and housing starts have shown renewed vigour since the spring across the country, reversing part of the cooling that took place in the second half of 2012 and early 2013.
“Homebuyers seemed unfazed by the slight deterioration in affordability – we saw the market regain some momentum in the second quarter with home resales increasing 6.4%,” said Craig Wright, Senior VP and Chief Economist, RBC. “Resales should stabilize close to the recent not-too-hot, not-too-cold levels in the near-term, barring any further changes in housing policy by the federal government.”
The RBC housing affordability measure captures the proportion of pre-tax household income that would be needed to service the costs of owning a specified category of home at going market values (a rise in the measure represents deterioration in affordability).
During the second quarter of 2013, affordability measures at the national level rose for two of the three categories of homes tracked. RBC’s measure for the detached bungalow rose 0.3 percentage points and for the standard two-storey home rose 0.4 percentage points to 42.7% and 48.4%, respectively. The measure for the standard condominium was unchanged at 27.9%.