Friday, July 4, 2014

Housing Affordability Becoming Impossible, Check Average Housng Prices Across Canada

Housing affordability is a national disaster that begs further investigation.

The average national resale home price in May: $416,584.

The annual gross income needed to afford that price based on a 5-per-cent down payment and a five-year mortgage: $89,363.

The estimated median family employment income: $68,692.

In that $20,671 shortfall is the considerably, but not entirely, depressing story of Canada’s housing market at midyear. The bad news: Vancouver and Toronto are deserts of affordability, and Calgary’s starting to look troublesome. The good: National data obscure the fact that affordability is still reasonable in some cities.

We hear plenty about housing affordability from banks and real estate people. Now, the Personal Finance column weighs in with some analysis focused on this question: What income does it take to afford a house on a national basis and in eight cities?

For answers, a hypothetical mortgage was set up for these markets using average May resale prices as shown by the Canadian Real Estate Association, a 5-per-cent down payment and a five-year, fixed-rate mortgage at 2.99 per cent. To calculate how much income is needed to support the resulting mortgage payments, we’ll refer to the gross debt service ratio, or GDS.

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