Although existing home sales in the fourth quarter of 2010 were down 19% year over year, the fact they were up 12.7% compared to Q3/2010 clearly suggests that Canada’s housing market was picking up strength in the final months of 2010.
Factors contributing to this improvement include strong growth of full time employment (+152,000 gain over the previous four months) plus an improvement in affordability stemming from a combination of lower mortgage rates and a significant slowdown in house prices.
Looking forward, the fundamental drivers of housing demand remain positive.
First, based on the most recent Bank of Canada Business Outlook Survey, the outlook for job growth over the next twelve months exhibited a healthy increase in the fourth quarter and now stands at its highest level since the fourth quarter of 2009.
Second, according to the most recent Royal Bank Housing Trends and Affordability Report, housing affordability improved in the third quarter due to lower mortgage rates and some softening in home prices.
Moreover, according to the report, further improvement in affordability is likely due to moderating house prices and rising incomes, despite the prospect for somewhat higher mortgage rates.