Calgary’s housing market has become more affordable in recent months, though a little less than in other major cities, according to a new study that compares median home costs to the income needed to pay for them based on mortgage qualification rates.
“Rates have risen slightly since June, but home prices have dropped more substantially, making homes more affordable overall in Canada,” says James Laird, co-CEO of Ratehub.ca.
The Online Mortgage Buying Market examined real estate data for June, August and October from Canada’s major markets.
The new study is a follow-up to an earlier one published in September, which found that affordability increased from June to August due to falling house prices, even though borrowing costs had risen.
In June, for example, the median home price in Calgary was $530,500, which required $108,050 annual income to qualify for a 5.21 percent mortgage rate, or effectively 7.21 percent according to the federal stress test.
In August, the median price was $521,500 and a buyer needed $107,150 to get a 5.3 percent loan and qualify under the 7.3 percent stress test.
By October, a borrower had to qualify at 7.44 percent under the stress test, but only needed $106,800, $350 less annual income than August and $1,250 less than June.
While it’s a silver lining for buyers, the decline in required income was the smallest among Canadian cities, in part because prices have held up better in Calgary, Laird says.
By comparison, Victoria saw the biggest increase in affordability between August and October. There, the income needed to qualify for a mortgage for a home with an average price ($915,300) fell more than $4,800 from $183,7000 to $178,890.
The Victorian market also saw the most significant drop in average price, down $38,500. By comparison, the median price in Calgary dropped just $8,300.
“That being said, Calgary is still one of the most affordable major markets,” notes Laird.
Compare that to Toronto, where the median price in October was $1,098,200, more than $26,000 less than August.
However, one buyer required an income of nearly $212,000 to qualify for a mortgage. That compared to August and June, when a buyer needed about $214,000 and nearly $227,000, respectively.
Small improvements aside, buyers and sellers are still adapting to new market conditions, says a local broker.
“There’s a double whammy where people have to adjust to higher borrowing costs and lower prices,” says Justin Havre, a real estate agent with Re/Max’s Justin Havre and Associates in Calgary.
In turn, some house hunters are reluctant to buy amid falling prices, fearing that the value of the newly purchased home will continue to fall.
“In the short term, prices can be a bit of a roller coaster, but in the long term, real estate is still a good investment,” says Havre.
Similarly, salespeople need to adjust their expectations.
“They can’t shoot for the stars, push the boundaries of what the market supports,” says Havre.
In general, prices have held up amid declining sales as inventory has shrunk further, and that’s not likely to change anytime soon, Havre adds. “People are now reluctant to move at this point unless they have to because they’re waiting to see what happens.”