(CEP News) - A near-15% decline in Canadian home prices from their peak in 2007 is causing housing affordability to climb higher, Desjardins reported Wednesday.

Desjardins noted that house prices in Canada fell an average 4.6% to below $300,000 in the fourth quarter. As a result, the Desjardins Affordability Index rose to 121.9, up from 115.4 in the previous quarter and closing in on the historical average.

Price declines throughout Ontario resulted in more affordable house prices in Canada’s most populous province, particularly in Oshawa, Hamilton and Windsor.

Affordability improved at a slower rate in Quebec, with the average house price stabilized at around $210,000. “Although Québec has avoided price declines to date, this possibility cannot be ruled out,” the report said. “If the recession is harsher than expected, the market could end up with a surplus situation, as in the early 90s.”

For all of 2008, the index averaged 128.7, meaning the average disposable income was about 28.7% higher than the income mortgage lenders require to finance the purchase of an average priced residence, Desjardins said.

Despite the increased affordability across the country, Desjardins says housing activity will continue to drag as a result of the economic turmoil.

“The deterioration in the economic situation, among other things resulting in substantial job losses and low consumer confidence, will put additional weight on housing activity in Canada,” the report said.

By Stephen Huebl, shuebl@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca

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Posted in Categories: Canada, Economy, Housing, Releases, USA.

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