OTTAWA — The Royal Bank of Canada says the ability of Canadians to keep up with housing costs has been improving of late, but warns that’s about to change. RBC’s latest housing affordability measure shows home servicing costs relative to incomes dipped slightly in the last three months of 2013, after having risen the previous two quarters.But the relief will be temporary, the bank says in a new report, because mortgage rates are due to start rising this year.“RBC anticipates that as longer-term interest rates begin to moderately rise, the costs of owning a home at market value will gradually outpace (growth) household incomes by late-2014, leading to strained affordability in several markets across Canada, much like the trend in Toronto,” RBC chief economist Craig Wright said in the report.The finding bucks the recent trend, which has seen mortgage rates remain stable or even moving lower, with some brokers offering five-year fixed rates below 3%.Still, the report predicts that with bond yields expected to drift upwards on the strength of an improving economy, mortgage rates will be pushed north as well.The RBC notes that bond yields influence long-term mortgage rates more directly than the Bank of Canada’s rate setting, which impacts short-term rates and is not expected to change until sometime in 2015.In the fourth quarter, the bank estimates maintaining a detached bungalow at current market prices would have taken up 43.1% of average household income, while the cost of a two-storey home would have taken 48.7%.Both measures are 0.2 points lower than was the case in the third quarter.The improvement was mostly attributed to growth in average household incomes outstripping moderately increased home ownership costs in the last three months of the year.But the change is in the margins, the report adds, noting that home affordability in Canada has remained largely stable in the past few years.Given the nature of the Canadian market, the measure varies widely by location. For instance, the affordability measure on a detached bungalow in Vancouver dropped 2.3 points in the fourth quarter but still stood at 81.6%, by far the highest in the country.Toronto was the second least affordable market tipping in at 55.6% on the RBC index, followed by Montreal at 38.8, Ottawa at 36.7, Calgary at 33.8 and Edmonton at 33.3%.As well, there is a major difference in affordability based on the nature of the home ownership, with owning a detached home at market value “more of a stretch” for homebuyers than owning a condominium, the report states.The RBC index represents the percentage of pre-tax household income that is needed to service the cost of owning a home at current market prices, including payments for a mortgage, utilities and property taxes.The affordability measure has more relevance to newer home buyers since the vast majority of Canadians will have bought their homes in the past, when prices were lower.
WASHINGTON – U.S. industrial production fell in August by the largest amount in more than three years as factories produced fewer cars and other manufactured goods and Hurricane Isaac triggered shutdowns along the Gulf Coast.Industrial production dropped 1.2 per cent in August compared to July, the Federal Reserve said Friday. It was the biggest setback since a 1.7 per cent decline in March 2009, when the country was in recession.Manufacturing output, the most important component of industrial production, fell 0.7 per cent, led by a 4 per cent drop in output at auto plants.Manufacturing helped lift the U.S. out of the Great Recession, but it slowed in the spring as consumers cut back on spending, businesses invested less in machinery and demand for U.S. exports was hurt by global weakness.U.S. factory activity shrank for a third straight month in August, according to the Institute for Supply Management’s closely watched survey of manufacturing conditions.In August, employers added just 96,000 jobs. That’s down from 141,000 in July and far below the average 226,000 a month created in the January-March quarter.Growth slowed in the April-June quarter to an annual rate of just 1.7 per cent, down from 2 per cent in the January-March quarter and 4.1 per cent in the final three months of last year.The weakness in manufacturing in August was widespread. Production fell at factories making machinery, computers, airplanes and furniture.Even with the August decline, output at manufacturing plants is still 20.7 per cent above the recession low hit in June 2009.Output in mining, which also includes oil and gas production, fell 1.8 per cent in August compared to July with much of that weakness attributed to precautionary shutdowns of oil and gas rigs in the Gulf of Mexico in advance of Hurricane Isaac in late August.Output at the nation’s utilities dropped 3.6 per cent in August after posting a 1.3 per cent increase in July. AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email by News Staff Posted Sep 14, 2012 10:00 am MDT US industrial production fell 1.2 per cent in August, biggest drop in more than 3 years