Housing affordability shows improvement: RBC

Canadian housing affordability showed signs of improving in the first quarter of this year as softer prices lured buyers into the market, according to a quarterly report released Wednesday from Royal Bank.

The improvements in home ownership costs were largely driven by lower mortgage rates, along with federal government support for the mortgage securities market. RBC said that the in first three months of this year, monthly payments for a typical detached bungalow in Canada dropped by about 17 per cent from a year ago.

"With the turmoil in financial markets partially subsiding and the flow of credit increasing, home resale activity has rallied impressively since the late winter," said Robert Hogue, RBC senior economist, adding that the rebound has seen been in all major cities across the country.

For the first quarter of 2009, RBC said the percentage of pre-tax household income needed to afford a benchmark detached bungalow moved to 39.4 per cent, the standard townhouse to 31.9 per cent, the standard condo to 27.1 per cent and the standard two-storey home to 44.7 per cent respectively.

Affordability improved in a range of 2.8 percentage points for standard condominiums and five percentage points for two-storey homes, marking the third consecutive quarterly decline in home ownership costs.

Hogue cautioned that the recovery in the housing market still faces hurdles.

"With property values stabilizing and the effect of the steep drop in mortgage rates likely behind us, further improvement in affordability will depend on greater gains in family income. Those gains will be dictated by the speed of the economic recovery expected during the second half of this year," he said.