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Calgary’s housing market has become more affordable over the past few months, though slightly less so than other major cities, according to a new study comparing average home costs with the income required to afford it based on mortgage qualifying rates.
“Rates have gone up just a little bit since June, but home prices have come down more substantially, making homes more affordable in Canada overall,” says James Laird, co-chief executive officer of Ratehub.ca.
In June, for example, the average price of a home in Calgary was $530,500, requiring $108,050 of annual income to qualify for a mortgage rate of 5.21 per cent, or effectively 7.21 per cent under the federal stress test.
Although a silver lining for buyers, the drop in income required was the least among Canadian cities in part because prices in Calgary have held up better, Laird says.
By comparison, Victoria saw the largest increase in affordability between August and October. There, the income required to qualify for a mortgage for the average priced home ($915,300) fell more than $4,800 from $183,7000 to $178,890.
Victoria’s market also saw the most significant decrease in the average price, falling by $38,500. By comparison, the average price in Calgary only fell $8,300.
Yet a buyer there required an income of nearly $212,000 to qualify for a mortgage. That’s compared with August and June when a buyer needed about $214,000 and nearly $227,000, respectively.
Slight improvements aside, buyers and sellers are still adjusting to the new market conditions, says a local realtor.
“There is a double-whammy where people must adjust to higher borrowing costs and lower pricing,” says Justin Havre, realtor with Justin Havre and Associates of Re/Max in Calgary.
In turn, some house-hunters are reluctant to buy amid falling prices, fearing their newly purchased home’s value will continue to fall.
“In the short-term, pricing can be a bit of a rollercoaster, but over the long-term real estate remains a sound investment,” Havre notes.
Similarly, sellers must adjust their expectations.
“They can’t shoot for the stars, pushing the boundaries of what the market supports,” Havre says.
Overall, pricing has held up amid declining sales because inventory has fallen off even more, and that is unlikely to change anytime soon, Havre adds. “People now are reluctant to move right now — unless they have to — because they are waiting to see what happens.”
