Sales of existing single-family homes (90% of the resale market) disappointed in January by falling back to an 11½ year low of 4.05 million units. As such, I think that we are at a point where downside in activity is limited. I estimate that the combination of falling home prices and lower mortgage rates propelled the home affordability index to a new record high in January.

Though this development is a necessary condition to reduce the inventory glut of unsold homes – which has come down markedly in recent months – progress is being hampered by tighter lending standards and more difficult labour market conditions. The key for authorities over the coming months will be to ensure that households with good balance sheets can get access to credit in order to take advantage of the best home affordability index in a generation (that also means being able to keep interest rates low). I do not think that buying a home in the U.S. at this point is a money-losing proposition over a 30-year horizon.

Mounir R. El-Ayari, CIM, FCSI, C.h. P. Strategic Wealth
Investment Advisor
Associate Portfolio Manager
e-mail: mounir.el-ayari@nbf.ca