Housing data paint a mixed picture
By Peter Diekmeyer • Bankrate.com

While much of the recent housing sector data has been mixed, affordability data have worsened steadily. This month, RBC released its latest assessment, which concluded that the picture is getting grimmer for Canadians trying to get into their first homes or to hang on to exiting properties.

"Nationwide housing affordability deteriorated in every consecutive quarter throughout 2007 to end up at its most unaffordable level since the housing bubble peaked in 1990," wrote RBC's assistant chief economist Derek Holt in a letter to clients earlier this month. "The lagged effects of higher fixed mortgage rates continue to be a significant (reason)."

Will US turmoil affect Canada?
Another cause for worry among Canadian housing sector stakeholders relates to continuing uncertainty south of the border. US house prices continue to head south and tightness among the country's lenders isn't helping. True, the Federal Reserve did cut its policy rate by 75 basis points earlier this week. But, according to one expert, the extent to which such cuts influence mortgage rates is increasingly open to question.

According to Beata Caranci, director of economic forecasting at TD Bank Financial Group, as of early this month, US adjustable rate mortgages, known as ARMs, had come down by only 47 basis points since the start of the year, despite the fact that the Fed brought down its policy rate by 225 basis points. "There is very limited benefit to be had from further Fed cuts for these owners," says Caranci. "Once the short-lived impact from fiscal stimulus dissipates, the US economy could relapse in early 2009."

What this means for the Canadian housing sector isn't clear. According to Porter, sagging affordability and the likelihood of increased consumer caution point to a calmer housing market throughout 2008.

Porter is not alone in his thinking. His view is shared by many observers, including both the Canada Mortgage and Housing Corporation, or CMHC, and CREA. That said, many of the same experts also predicted such a slowdown throughout much of last year, too. Yet we are still waiting.

Peter Diekmeyer is a Montreal- based freelance business and economics writer.