Home affordability a London strength

If you're thinking of changing homes, you've probably been monitoring home prices and interest rates lately, and you might also be following affordability trends.
Affordability is a concept that takes into account what you earn, the cost of borrowing money and the average price of a typical home.
To explain how this works, if your income increases while housing prices and mortgage rates remain the same, it will take a smaller percentage of your income to cover your cost of housing. If your income increases at the same time rates are declining, housing becomes even more affordable for you. When interest rates rise above 10%, or even 20% as we saw in the early 1980s, it hardly matters what you earn or what the house is worth -- the carrying costs can significantly decrease affordability.
Recent news from RBC Economics Research in its annual home affordability study shows that despite interest rates remaining incredibly low, national home prices were pushed upward by increased costs of construction materials related to rises in oil and gas prices. This resulted in affordability for Canadians slipping slightly in the first quarter of 2011. RBC senior economist Robert Hogue noted "provincial levels generally continue to stand near their long-term averages, suggesting that owning a home (in Ontario) still remains affordable."
In fact, very modest house price increases provincially mean relatively unchanged levels of affordability in Ontario, while the demand-supply equation also remains balanced, with just a slightly stronger position for sellers. All things considered, the Ontario market appears to be on a sustainable path so far this year, ahead of the expected changes in interest rates.
Here in London, affordability remains positive for both homeowners and home buyers, and housing affordability continues to be one of our city's greatest strengths, attracting both new residents and increased business investment.
If you are considering buying a home,now is the time to buy.
It is widely anticipated that medium- and long-term interest rates will rise before the end of this year, triggered by hints from the federal government. Supporting this notion is expert economic forecaster Peter Andersen, who was quoted in the current issue of the Canadian Housing Industry Economic Update prepared for the Canadian Home Builders' Association, suggesting that the low interest rate environment will not last much longer.
Five-year mortgage rates are already on the move, increasing from 4.09% at the beginning of March to 4.54% now, and will likely move to over 5% by year-end. Rising commodity prices, supply shocks from the Middle East and Japan, and stronger than expected U.S. economic growth could all become factors that may heighten the risk of spill-over price effects into general inflation.
A variety of housing types, mortgage products, and payment options make home ownership a solid decision for many. When you consider London's housing affordability on top of our great parks, schools, health care and rich culture, the decision to buy local and buy now is obvious.
Shellie Chowns is president of the London Home Builders' Association.
Source http://www.lfpress.com/