Business

The Royal Bank says modest increases in home prices and mortgage rates slightly eroded Canadian housing affordability in the second quarter.

The RBC housing trends reports says it was the second straight three-month period in which housing affordability declined in Canada.

The increase in the cost of owning a home as a share of household income followed back-to-back quarterly declines in the latter half of 2011.

Affordability deteriorated in two of three housing categories, detached bungalows and two-storey homes, while condominiums were flat.

Detached bungalows were 0.2 percentage points less affordable, while the measure for two-storey homes worsened by 0.6 percentage points.

The national numbers for bungalows was exaggerated by extremely poor affordability in the Vancouver area, but had little impact on two-storey homes.

The Vancouver-area continued to be, by far, the least affordable in Canada and was very close to the worst on record, said the report released Monday.

The Toronto-area market also deteriorated. While home ownership costs were above the historical average, they were still well below the peaks experienced during the housing bubble in the late 1980s.

Strong activity worsened affordability in Saskatchewan and Manitoba, but were near their historical norms. Atlantic Canada suffered a modest deterioration.

Montreal and Alberta bucked the national trend by showing some improvements in affordability.

RBC says the Canadian housing market showed signs of cooling in the second quarter as home resales fell in May and June but were stable in July. That followed strong activity at the start of the year.