“I have cut and paste the Ontario portion of the RBC report below, click the link for the full report. I find that affordability is the truest indication of where things might be going as it takes into account average household earnings,current interest rates and the price of homes and tells you what people can afford, which in turn dictates where prices are going. Overall it seems affordability has turned slightly with a .5 to 1.2% change in the last quarter of this year with the rise of housing prices but considering we had seen an erosion of 4%-7% in the last year says we are still in very attractive territory historically and have ground to gain.”
Ontario — In full recovery mode
The substantial improvement in housing affordability since early last year appears
to have worked its magic in Ontario. The sudden downturn that hit the
province’s housing market late last year is now officially a thing of the past —
resale levels have generally recovered most of the ground lost and, more importantly,
prices have returned to, and in some cases surpassed, earlier peaks. While
this remarkable turnaround has brought back confidence in the market — even a
bit of frenzy in certain pockets around the province — the downside is that rising
property values have begun to undo some of the progress made on the affordability
front. In the third quarter, RBC’s affordability measures for Ontario rose for the
first time since early 2008, up between 0.5 and 1.0 percentage points. Nonetheless,
these increases represent only modest erosion of the four to seven percentage-
point declines achieved previously and affordability remains generally attractive
in the province from an historical point of view.
For the full report: http://www.rbc.com/economics/market/pdf/house.pdf
Robert Hogue
Senior Economist
(416) 974-6192
robert.hogue@rbc.com