Quote:
Originally Posted by PsYcNeT
Canadian Income vs Home Prices 1994-2024
From here
It's pretty easy to see why this generation feels a lot more hopeless about home ownership, when wages have absolutely not kept pace with home prices. |
I think there are better ways to present this data, because the interest rate and inflation numbers can easily skew peoples prospective on this.
For example with the numbers you used.
1994
Monthly Wage $2,723
Down Payment 5.9 months wage
Monthly Mortgage 47% of wage
2024
Monthly Wage $6,869
Down Payment 10.1 months wage
Monthly Mortgage 61% of wage
But I also think you are working from a somewhat cherry picked data set in terms of interest rates and home prices, where 1994 might be towards the lower end of an affordability curve with interest rates dropping, and prices not yet having responded. A short google search tells me in 92/93 rates were more in the 8%-9%
And with your 2024 number reflecting a temporary spike in interest rates, that was expected by just about everyone to fall.
If you redo the 2024 numbers at 4% interest it looks like this.
2024
Monthly Wage $6,869
Down Payment 10.1 months wage
Monthly Mortgage 49% of wage
Meaning that it takes longer to save up and buy a house, but the cost of carrying a house hasn't moved much, and I would speculate that other mechanisms like 5% for the first $500,000 or first time home buyers savings accounts have made up some of the gap in saving for a down payment.
All of this to say, the numbers when you actually look at them show that home prices haven't changed much at all. What has changed is that the cost of participating in society is higher, transportation, communication, entertainment all consume a higher share of income, and people feel squeezed by that, but don't necessarily blame it directly on that. This also does not capture that we are buying a lot more house for our money, what was the average sqft and finishing on that $170K house, 1500 & Luminant? what is the average on the $690K house? 2000 & Stone/Wood? Basically rather than taking productivity gains and making things cheaper, we have taken them and made things better, but they cost more.
None of this is to blame the people who are struggling with the market, but to explain that changing market expectation on how we allocate our money squeezing people.