Housing more affordable than a year ago

An RBC Economics report on home ownership released Wednesday indicates housing is more affordable than it was a year ago. But the report, which spans the April-to-June second quarter of 2009, may already be dated, as housing prices have edged up during the summer months.

Even the report itself admits its affordability figure may have bottomed out.

"This restorative phase of the affordability cycle is likely running out of steam," the nine-page report stated in its second paragraph. "The two major contributors to the significant improvement during the past year or so -- the decline in mortgage rates and the drift down in prices -- appear to have reached turning points."

In B.C., second-quarter homeownership costs fell in all four areas the survey measures. (RBC Affordability captures the proportion of pre-tax household income required to meet costs of owning a home, including mortgage payments, property taxes and utilities.)

Home ownership costs for a detached bungalow fell 11.3 percentage points from the same period in 2008, to 58.4 per cent. Standard two-storey house costs fell 12.8 points to 64.4 per cent, standard townhouse costs dropped 7.6 points to 45.6 per cent, and standard condominium costs fell 6.2 points to 32.7 per cent.

For the quarter, the drop in B.C. was not as dramatic, falling just 0.7 of a percentage point for detached bungalows, 0.9 point for two-storeys, 1.0 point for townhouses and 0.1 point for condominiums.

"While the cumulative declines in the past five quarters have been the sharpest since 1991, the latest levels are still significantly above long-term averages, suggesting that affordability in the province has yet to be fully restored," the report said.

And with housing prices rising across the province in late summer, it is unlikely we will see further drops in this measurement. Vancouver house prices today are about seven per cent higher than they were at the most affordable time of the three-month study period.

"We've reversed our trend of increasing affordability and we are going the other way," says Tsur Somerville, director of the Centre for Urban Economics and Real Estate at the University of B.C.'s Sauder School of Business.

Throughout the spring and summer, sales of existing homes were up 125 per cent over the low point early this year in the province. In Vancouver, sales of existing homes through to the end of June are three times what they were at the end of 2008, which marked a 19-year low.

The huge increase in home-buying in the Vancouver area is difficult to fathom, Somerville said.

"The craziness doesn't make sense, because that happens either when the economy is going gangbusters or when there is a speculative frenzy, and we're not [experiencing] either of those," he said.

(prepared by Marke Andrews/Vancouver Sun)