Toronto real estate. Toronto homes are getting more affordable

The upside to the downside in housing prices is it has made housing more affordable. The index of Canadian housing affordability is "slowly but surely inching its way" back up to its historic average.

The country's largest bank, RBC made housing even more affordable, announcing mortgage rate cuts of up to three-quarters of a percentage point.  Other banks began following with similar widespread cuts.

The grim economic forecasts attributable to the global financial crisis caused household confidence to plummet this fall. This climate of uncertainty also contributed to the ongoing decline in the number of existing homes sold, which is down 12.6% in Canada since the start of the year.

On the other hand, the quasi-stability of mortgage rates these past few months did nothing to influence recent shifts in affordability in Canada.  The benchmark one-year rate remained at 6.25% while the five-year rate rose slightly from 7.1% at the end of June to 7.2% at the end of September.  The recent rate cuts reduce the one-year posted rate at both RBC to 5.6% and their five-year rates to 6.95%.

Americans, meanwhile, were getting an even greater dose of mortgage rate relief. U.S. mortgage rates dropped by the most in at least seven years, a drop which was credited to the U.S. Federal Reserve's pledge this week to buy US$600-billion US of debt, aimed at increasing the availability of credit.

U.S. housing reports, meanwhile, continued to suggest that economy is in desperate need of such relief to revive an already deeply depressed market that continued to deteriorate last month. New U.S. home sales tumbled 5.3% last month to their lowest level since the 1991 recession, while prices fell 7% from the already depressed levels of a year earlier.

BMOCapital Markets analyst Benjamin Reitzes said recent declines in recent months occurred as "mortgage rates increased, credit conditions tightened, consumer confidence plummeted and home prices continued to drop, all weighing on the U.S. housing market."

This month's sales won't be pretty either, though December could see a bounce thanks to the U.S. Federal Reserves measures to inject liquidity into mortgage markets, which resulted in the fall in mortgage rates this week.

financialpost.com

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Toronto real estate. Toronto homes are getting more affordable

Reviewed by citra
Published : 2008-11-26T22:55:00-08:00
Rating : 4.5