Here's the annual income required to buy a home in Ottawa

A "For Sale" sign is seen in an undated Shutterstock image.

The required income to buy a new home in Ottawa dropped another $2,080 this fall as house prices continue to fall.

And RateHub.ca says there is reason to be "cautiously optimistic" about the state of home affordability in Ottawa and across Canada with home prices declining and signals from the Bank of Canada that the "worst of the (interest) rate hikes may be behind us."

A new report from RateHub.ca shows that homebuyers needed to earn at least $127,900 a year in October to meet the requirements to obtain a mortgage for an average priced home in the capital, with a 20 per cent down payment.

That's down from a required income of $129,800 in August, and $137,050 in June.

"While house prices have gone down noticeably, mortgage rates and the stress test are only slightly up from where they were just a few months ago," RateHub.ca said in a statement.

The report looks at the income required to purchase the average priced home in Ottawa in October, along with the mortgage rate and the stress test rate. The average price of a home in Ottawa last month was $630,800, with the stress test rate of 7.44 per cent and a mortgage rate of 5.44 per cent.

RateHub.ca says homes are becoming more affordable in Ottawa and across Canada this fall.

"With the Bank of Canada suggesting that rate hikes are nearing an end and the continued softening of home prices, affordability should continue to improve in the coming months," RateHub.ca Co-CEO James Laird said in a news release.

"It is likely that June 2022 will prove to be the low point for affordability, since mortgage rates were up while home prices had not yet softened significantly."

Vancouver is the most expensive city in Canada to buy a home, with an annual income of $220,700 required to purchase a home. Toronto is second, with a required income of $211,650.

According to the Ottawa Real Estate Board, the average price of a residential-class property was $677,873 in Ottawa last month, down five per cent from a year ago.

"Falling home prices combined with relatively stable (though high) mortgage rates mean that affordability is likely to continue to improve over the remainder of 2022 and into 2023," RateHub.ca said.