Navigating housing markets is akin to crossing the Atlantic Ocean in a canoe. You'll be paddling along in smooth water, but suddenly, monster waves come crashing down, spinning your canoe around and around until you’re not sure in what direction you’re headed. Supply and prices rise and fall with the prevailing winds, as do mortgage rates as financial tempests swirl, sometimes good; sometimes bad. A new housing market report says most Canadian housing markets had smooth sailing in July, with a combination of lower prices and slightly easing mortgage rates leading to favourable conditions for homeowners and those thinking of dropping anchor on a new home. The Ratehub.ca Housing Affordability Report measured changes in housing costs in selected markets in July compared to June, finding only one market with deteriorating conditions. Ratehub.ca defines affordability as the amount of income a buyer would need to earn to qualify for a mortgage on the average priced home in their market. It also looks at the average monthly mortgage payment in each city, and whether they rise and fall each month. “The study analyzes national real estate data, changing mortgage rates, and the mortgage stress test, providing a month-over-month snapshot of how easy it is to buy a home in cities across Canada,” says Penelope Graham, head of content at Ratehub.ca, adding “the majority of the cities we studied saw improved home affordability. Mortgage rates dropped slightly in July, and most cities also saw home prices decline.” .“Of the 13 cities studied, only one saw home affordability worsen,” she says. “St. John’s saw $710 in additional income required to purchase the average home. This is due to the home price increase of $6,600, the highest of all the cities. This is the third month where St. John’s has seen an increase in income required to purchase a home.” It was calmer seas in the Greater Toronto Area, says Graham. “Toronto saw the biggest improvement in affordability with $4,040 less income required to purchase the average home, the second consecutive month where Toronto saw improvement,” she says. “Monthly mortgage payments saw a lot more movement in July. A Toronto borrower in this scenario would save $112 dollars on their monthly mortgage payment or $1,344 per a year compared to if they bought in June. The St. John’s borrower in this scenario would pay an additional $17 dollars on their monthly mortgage payment or $204 per a year.” Canada’s most expensive market, Vancouver, saw the average home sales price drop $7,800, resulting in $3,100 less income required to purchase the average home, lowering the average mortgage payment by $88 or $1,056 per year. .In Alberta, the average home sales price in Edmonton dropped $12,200, resulting in $2,930 less income required to buy the average home, with the monthly mortgage payment falling by $80, or $960 per year. Calgary's average home price declined $2,200, requiring less income of $1,220 to buy the average home and a monthly mortgage payment of $35 or $420 per year. Going forward, the smooth sea of affordability is seeing rising waves in the form of fixed mortgage rates, says Graham. “Fixed mortgage rates have marched higher throughout August, as bond yields jumped higher in response to ongoing inflation and trade uncertainty,” she says. “While the average Big Five Bank’s rate went down this month, the lowest five-year fixed rate has increased to 4.04%.""If you’re currently shopping for a home or coming up for a renewal, it’s a good idea to take a look at what rates are currently available to you and consider getting a pre-approval to lock in today’s lowest rate for up to 120 days.” “Remember that securing a lower rate, such as 4.04%, will have a big impact on how much you can qualify for. For the purposes of this study, we use the average of the Big Five Bank’s rate to illustrate affordability changes.” .Will it be smooth sailing heading into the fall buying season? “With sales posting a fourth consecutive increase in July, and almost 4% at that, the long-anticipated post-inflation crisis pickup in housing seems to have finally arrived,” says Shaun Cathcart, senior economist at the Canadian Real Estate Association. “Looking ahead a little bit, it will be interesting to see how buyers react to the burst of new supply that typically shows up in the first half of September.”
