Here are the highlights of the RBC Housing Affordability Study for housing market data up to December 2006.
- Housing affordability conditions improved in Canada in the final quarter of 2006. The improvements at the national level were chiefly driven by faster income growth in tight labour markets, moderating house price increases, a small decline in mortgage rates and lower utility bills.
- Although the current housing market correction varies dramatically across the country, the dominant trend in the fourth quarter was a weaker pace of resale activity, an increase of inventories on the market and more moderate price growth.
- These key fundamentals point towards more balanced housing market conditions in the coming year and the potential for more affordability improvements in 2007 — especially in western Canada.
- The stark east-west divide in provincial housing markets appears to be softening. The western provinces continue to show signs of price growth topping out with British Columbia, Alberta and Saskatchewan all likely having reached pinnacles in the pace of price appreciation.
- While Alberta saw its fifth consecutive across-the-board affordability deterioration, the latest numbers indicate that the pace is trending downward with the potential for affordability improvements this year.
- The remaining western provinces reported affordability improvements: two-storey and townhome segments in British Columbia; two-storey homes in Saskatchewan; and, the two-storey, detached and condo segments in Manitoba.
- Across-the-board affordability improvements were delivered in Ontario, Quebec and Atlantic Canada as housing markets continued to soften alongside weaker economic growth. Toronto, Ottawa and Montreal all reported substantial and widespread improvements — buoyed by a sharp drop in monthly utility bills.
- Mortgage quality remains solid in Canada and the sub-prime mortgage market is tiny. Canada, therefore, does not face the same mortgage market risks as the United States. Even U.S. mortgage market fears have gotten out of hand — a little more than one-third of households do not have a mortgage and 49% of households have prime-rated mortgages that are very healthy.