RBC Affordability Report: Vancouver Real Estate is Still Unaffordable
RBC Royal Bank released their quarterly (is it really the 2nd quarter already?) housing affordability report today and the news is not good on the affordability front. The report starts out by saying:
Nationwide housing affordability deteriorated in every consecutive quarter throughout 2007 to end up at its most unaffordable level since the housing bubble peaked in 1990. Back then, soaring interest rates and a recession sparked much of the trouble. Today, however, a long upward trend in house prices driven by sounder macroeconomic fundamentals like job growth is primarily responsible. Adding more fuel to this housing cycle is mortgage product innovation that has expanded the market to more potential buyers since mortgage insurance liberalization began two years ago.
They did predict some good news for mortgage rates, especially fixed rates, and even affordability:
... our forecast sees the popular five year mortgage rate dropping by a further 75 basis points by year-end. Going forward, falling mortgage rates, cooler forecast house price gains and decent income growth should all lead to improved affordability across most markets.
Here in Vancouver things are not so rosy on the affordability front and RBC predicts a slowing of appreciation due to the low level of affordability.
Vancouver - markets still stressed
The strong house price gains recorded over the last few years continue to weigh on affordability conditions across the Vancouver market. Two-storey homes are the affordability outliers compared to other major markets with the average selling price now nearing a whopping $650,000 - this sits 35% above the average price for a comparable Toronto home. The sharp erosion in conditions is expected to start filtering through the resale market this year allowing the pace of activity to calm down. The new home market is being driven by the multiples segment that soared in February by 45%. Despite the surge in February starts, some moderation in activity is expected for 2008. This projected slowing is consistent with the sharp deterioration in housing affordability in recent quarters and the fact that most of the strength so far this year has been in the volatile multiples component. As well, a generalized slowing in economic activity, with attendant downward impact on employment and income, will also weigh on housing going forward. [bolding by me]
This sounds about right, except some neighbourhoods are still super hot. The Douglas Park neighbourhood, in the Cambie sub-area, is seeing almost weekly multiple-offer situations. Other areas are seeing inventory skyrocket and prices plateau.
I have to run, but the full report is attached. Fridays are meant to be for fun, but I thought you'd like to get housing affordability report as soon as possible.
Have a great weekend!
Matthew Collinge: REALTOR® serving all areas of Vancouver
