Quote:
Originally Posted by Oling_Roachinen
Obviously cherry picking, but if you tried to buy a house in 1985 in Calgary, you're looking at $75,000. In 2006, the average house is costing you $450,000.
Inflation between 1985 and 2006 wasn't quite doubled yet prices increased 6x.
Even if you don't cherry pick on the boom and busts, the cost of housing inflation is just in no way comparable to the dollar inflation.
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What matters is the monthly mtge payment, not the house price.
According to the BOC, mtge rates in 1985 were 11.75%. So a 5 yr fixed gives you a mtge payment of $757. For today's $450,000 house, at 2.59%, the mtge payment is $1,799. Much closer to the change in inflation.
Also, with today's lower interest rates, a larger portion of your payment is going towards the principal, meaning you are saving more. On average, 69% of what you pay goes to paying the principal and building equity. In 1985, only 28% of your money, on average, went to equity (and 72% of it was interest).
So the real cost of housing is not all that different. In fact, today's environment is arguably more advantageous.