Median Family Incomes Increase but Housing Remains Expensive

On Thursday, Stats Can released income figures for 2008 here.

Even compared to the highest incomes in Canada house prices in Alberta remain elevated.

According to Mike Fotiou for the first 17 days of September the median price of a single family home is at $390,000. This level is 4.26 times the median family income.

Whats does this buy? On Mike's site you can view daily sales prices and on Sept 17th there was one house which sold for exactly $390,000. A 1808 sqft 2 story home in Panorama Hills.

In Edmonton the median price for a single family home dropped to $350,000 in August. This is almost 4 times the median family income of $88,190. This 1600 sqft Ormsby home listed at $361,000 could theoretically sell for $350,000 given a typical discount (no sales prices are available).

For comparison the ratio in the US appears to be about 3.5 from this post but may have declined since then.

Homes in Alberta are pricey compared to local incomes but not overwhelmingly so. Considering how low interest rates are factors besides affordability are probably driving the current decline, such as lagging employment and saturated demand.

Weekend Post

Some thoughts on key events and reports of the last couple days:

Bank of Canada Raises Rates

These rates hikes were mostly symbolic to continue the narrative that "Canada rulz" as opposed to meeting inflation targets. Given these recent hikes, current low level of inflation, unwinding fiscal stimulus and weakening housing market I think the BoC will be under their 2% mandate for awhile.


inflation table


RBC Affordability

Carrying costs in Calgary appear reasonable in RBC's housing affordability report. It is important to note this report looks at monthly payments so the 5-year fixed rate being at historic lows masks absolute price level. However, local affordability is benefiting from a more modest price bounce compared to other centers and continued wage growth.

Although the report downplays the risk of a crash it's not exactly a strong reassurance.

While we agree that housing prices are currently historically elevated, we do not believe that any major slump will necessarily ensue.

Canada Mortgage Trends, report


Labour Market Survey

Another mixed report. While employment increased by 36,000 the unemployment rate also increased as more people entered the workforce.

• Good news: Full time up 80,000, part time down 44,000.

• Bad news: Private sector employment down 40,000 while public sector up 58,000 and self employment up 18,000.

• Statistical glitch - Last month there was a reported loss of 65,000 in educational services while this month there was a gain of 68,000.

Statscan report


Edmonton New Construction Update(again)

More single family homes being built in the face of a weak resale market. A glut is forming in this segment as an increasing level of construction will not be easily absorbed.

Edmonton Real Estate Blog - report

NEWSFLASH: It's not 1992

There is an article in the Edmonton Journal titled Buy sooner rather than later. The writer was bold enough to buy a townhouse in Edmonton for $55,000 in 1992 and uses this example to make the case for first time buyers to get on the property ladder.

Regardless of the boom and the city you live in, buying your first home is always tough.

However, In the 1990s buying a home in Edmonton was easier. And if you waited a year or so it was no big deal. Below is a chart of % after tax household income dedicated to mortgage payment from RBC Housing Affordability study. Note how all property types are currently less affordable now than at any other time in the chart range.


This number takes into account wages and interest rates so it is a good picture of relative difficulty of getting into the market. It assumes a 25% down payment which is much more difficult to get now because of the appreciation of the last few years. The author of the article was prudent enough to save $10,000 or 18% down payment in 1992 and gives the following advice:

Buy what you can afford: I know you might think it's tough in this market but don't push yourself to the limit.

Too many people are stretching amortization periods and putting down very small down payments.

The cheapest 2 bdrm townhouse in west Edmonton is currently about $200,000. An equivalent 18% down payment today is $36,000. How is it possible to buy sooner rather than later and save up that kind of money? To illustrate see the following average price chart for Edmonton showing both nominal and inflation adjusted prices. A certain percentage down payment will be proportional to the nominal amount and its relative size in terms of buying power would be proportional to the inflation adjust series.


Bottom line is the article is simply not applicable in 2007 Edmonton.