Housing market affordability

Latest Mortgage News: BoC Affordability Index Hits Worst Level Since 1991 – Mortgage Rates and Mortgage Broker News in Canada

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Housing affordability deteriorated to its worst level in more than 30 years, according to data from the Bank of Canada.

The BoC published the first quarter results of its Home Affordability Index (HAI) last week, which rose sharply compared to the previous quarter.

The data shows that a household must now spend 42.8% of their disposable income on housing-related expenses. That’s an increase from 39.7% in the fourth quarter of 2021 and from 34.7% a year earlier.

The Index measures the portion of income needed for housing costs, such as mortgage and utility payments, but excludes property taxes.

The release follows similar findings from the National Bank of Canada’s Housing Affordability Monitor for the first quarter. That measure, which strictly tracks mortgage servicing costs, saw its fifth consecutive deterioration.

“For the first time since 1994, it would take more than 50% of a representative household’s income to pay the mortgage on a representative home in Canada’s major urban centers,” NBC noted.

The change was fueled by a 46 bps quarterly increase in the 5-year benchmark rate used in the report’s affordability metrics, the largest quarterly increase since 2013.

Both fixed and variable rates have increased substantially since then.

Desjardins reviews his prospects for the housing market

Desjardins is the latest bank to revise its forecast for the country’s property market.

In a research note published Thursday, Desjardins economists said they expect home prices to fall 20% to 25% from the February peak through December 2023. Previously, they had forecast a 15% drop. .

“After peaking nationally in February, home prices continue to fall and
they have to go further before finding a bottom,” they wrote.

However, “despite the accelerated rate of decline, we continue to believe that home prices will end 2023 above their pre-pandemic levels nationally and in each province,” they added. “However, this is not likely to be the case for sales, which have fallen enough that most housing markets have returned to balanced territory.”

Desjardins noted that his “gloomier outlook” is due to a string of weak data so far this year, coupled with more aggressive-than-expected monetary policy tightening.

“However, weakness in the Canadian economy attributable primarily to the housing market downturn should prompt the Bank to start cutting rates late next year,” the economists added. “Markets seem to be predicting this as bond yields have probably peaked.”

The revision follows similar moves by RBC (link) and BMO. RBC economist Robert Hogue recently wrote that he expected existing home sales to fall nearly 23% this year and 15% next year, and the national benchmark price to fall a full 12% “from peak.” to low” for the second quarter of 2023. BMO, meanwhile, expects prices to fall more than 20%.

Farmhouse Prices Keep Rising – RE/MAX

Despite a weakening housing market across the country, Canada’s recreational properties continue to be in strong demand, according to a recent RE/MAX report.

While recreational property sales are down sharply, average prices remain well above prior year levels as of May.

“Supply levels are still at record lows, which means that if we see continued moderation in sales activity, there is ample room for the market to absorb a welcome increase in available listings,” said Chuck Murney, president of the Lakelands Association of Realtors “Prices are still trending near all-time highs, but have begun to show signs of peaking.”

Here are some examples of how cabin prices have held up across the country, again as of May 2022:

  • Kawartha Lakes, ON
    • Sales: -35.5% (year over year)
    • Average price: $806,000 (+30.4%)
  • Powell River Sunshine Coast, BC
    • Sales: No change
    • Average price: $677,950 (+43.3%)
  • Prince Edward Island
    • Sales: -8.5%
    • Average price: $405,686 (+20.9%)
  • Lethbridge, AB
    • Sales: -3.8%
    • Average price: $348,603 (+7.4%)

RE/MAX added that the rural countryside “is no longer just the focus of retirees looking for a quiet life in their golden years or families looking for fun in the summer sun,” but a hot spot for young professionals who increasingly work from home.

“The cabin becomes your primary residence, not a vacation home,” the report noted.

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