Canada's housing market became more affordable in the third quarter of 2012 as a result of a slight decrease in home prices and an increase in household incomes, according to RBC quarterly housing report. The report also notes that Canada's housing market has cooled further in the third quarter due to the fourth rule change of government backed mortgage insurance which made it more difficult for first time home buyers to afford to buy. It is expected that these modifications will ease by the end of the year and resale activity to stabilize in 2013.
The housing affordability measure captures the amount of pre-tax household income that would be needed to cover the costs of owning a specific home category at current market values. An increase in percentage represents a decrease in affordability while a decline represents and improvement in affordability. The higher the reading, the more difficult it is to afford a home at market values. For example, an affordability reading of 50% means that homeownership costs, including mortgage payments, utilities and property taxes, would take up 50% of a typical household's monthly pre-tax income. Three categories measured are detached bungalows, two-storey homes, and comdominuim apartments. During the third quarter of 2012, the national measures have fell in all three categories of homes. Detached bungalow is lower by 1.0%t to 42.0%, two storey home fell by 1.2% to 47.8% and for condominiom apartments decreased by 0.6% to 28%.
The full RBC Housing Trends and Affordability report is available online, atwww.rbc.com/economics/market/.