Sep 28, 2010, Calgary buyers ‘circle the wagons’ as home resales fall: RBC

Home resales in Calgary fell significantly through the spring and summer, reaching levels only moderately higher than the lows seen at the end of 2008 – the worst period in the housing downturn, according to the latest housing report released today by RBC Economics Research.

Renewed weakness in demand exerted downward pressure on home prices which fell for most housing types in the second quarter, said RBC.

The RBC affordability measures for Calgary edged lower, down between 0.1 and 0.5 percentage points across most housing categories with the exception of a 0.9 percentage increase for bungalows.

The RBC Housing Affordability Measure, which has been compiled since 1985, determines the proportion of pre-tax household income needed to service the costs of owning a home. The higher the reading, the more costly it is to afford a home. For example, an affordability reading of 50 per cent means that home ownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

“Buyers appear to be circling the wagons as favourable housing affordability has failed to spur sales following the fairly subdued rebound in activity which ran its course at the start of the year,” said Robert Hogue, senior economist, with RBC. “However, it might just be a question of time before they spring into action. Sustained economic recovery will eventually dissipate any lingering doubts about the attractiveness of home ownership in the city.”

RBC’s Housing Affordability Measure for a detached bungalow in Canada’s largest cities is as follows: Vancouver 74.0 per cent (up 1.7 percentage points from the last quarter), Toronto 50.2 per cent (up 2.4 percentage points), Montreal 43.2 per cent (up 1.8 percentage points), Ottawa 41.2 per cent (up 3.6 percentage points), Calgary 39.2 per cent (up 0.9 percentage points) and Edmonton 34.7 (up 2.5 percentage points).

In Alberta, the measure for the benchmark detached bungalow moved up to 34.3 per cent (an increase of 1.4 percentage points from the previous quarter), the standard townhouse slightly rose to 25.5 per cent (up 0.1 percentage points), the standard two-storey home increased to 37.5 per cent (up 0.7 percentage points). However, the standard condominium edged downward to 21.5 per cent (a 0.3 percentage point drop).

“Alberta’s housing market painted a mixed picture in the second quarter, with modest price increases in most categories and a marginal easing for condominium affordability,” said Hogue. “Overall, home ownership remains affordable with measures remaining at or below their long term average, implying little downside risk to the market and boding well for strengthening housing demand once the provincial job market shows more substantial gains.”

By Mario Toneguzzi, Calgary Herald