Toughest time ever to buy a home in Canada? | About That

Summary

In a discussion about the current Canadian housing market, Andrew highlights the stark contrast between past and present affordability. Despite higher mortgage rates in the early '90s, home ownership was more accessible due to lower housing prices relative to income. Today, Canadians face unprecedented challenges, with 64% of median income needed to buy a home, driven by rising costs and stagnant wages. While predictions suggest potential relief as interest rates may lower, the anticipated demand could further inflate prices, complicating the housing crisis. The report underscores a critical need for solutions to address this pressing issue.

Takeaways

• 🏠 High mortgage interest rates in the '90s were offset by significantly lower home prices compared to today.
• 📈 The ratio of home prices to income has dramatically increased, making homeownership less attainable for many Canadians.
• 💰 In Toronto, an average household now spends 85% of their income on housing, while in Vancouver, it's nearly 100%.
• 📊 The national average for housing expenses is around 64% of the median household income, which is far above the recommended 30-32%.
• 📉 Homeownership affordability has worsened over the past four decades, with a significant spike in the last two years.
• 🤔 Many Canadians feel hopeless about entering the housing market, especially in major cities.
• 📉 Economists predict a potential decrease in interest rates starting this year, which could slightly improve affordability.
• 📈 Lower interest rates may lead to increased demand for housing, complicating affordability issues.
• 🏘️ A substantial influx of new residents in Canada is likely to intensify competition for limited housing supply.
• 🔍 Solutions are urgently needed to address the ongoing imbalance in the housing market.

Q & A

What historical interest rates did Canadians face in the early '90s?

Canadians faced interest rates as high as 15% in the early '90s.

How did home prices in Toronto compare to household income in the early '90s?

In the early '90s, a house in Toronto cost around $250,000, with a median household income of about $59,000, making the price approximately four times the income.

What is the current average household income required to buy a home in Canada?

Currently, about 64% of the median household income is required to buy a home in Canada.

How does the affordability of housing today compare to the past?

Home ownership is now more out of reach than at any time in the last four decades, with many households spending a significant portion of their income on housing.

What percentage of their paycheque do Torontonians spend on housing?

In Toronto, an average income household spends about 85% of their paycheque on housing.

What has been the trend in the housing market in recent years?

There has been a massive spike in the income required to own a home, especially during the Bank of Canada's historic rate hikes.

What are lenders qualifying customers for compared to their actual affordability?

Lenders often qualify customers for loans that exceed what they can actually afford, leading to financial strain.

What do most Canadians think about entering the housing market?

76% of Canadians who have not yet entered the market believe that home ownership is currently out of reach.

What prediction do economists have regarding interest rates?

Economists predict that the Bank of Canada will begin to lower interest rates sometime in 2024 and continue into 2025.

How might falling interest rates impact the housing market?

Falling interest rates could increase demand for homes, potentially driving prices up even as loans become more affordable.