A look across Canada

This post will look at that price range in some of different markets (Edmonton, Calgary, Vancouver and Toronto). The properties picked have the following criteria:

• Asking price around $330,000
  
• Detached single family home
• Not an obvious teardown w/ indoor photos
  
• Close to downtown
  

This was done to avoid comparing a bigger and newer house in a distance suburb of one city to a central teardown in another. Due to the "central single family" criteria these are small places with land being a significant portion of the price. Click on the image for the Google street view.

Edmonton

$324,900
1034sqft, 1950s bungalow
basement suite
3.7km from downtown




Country living in Westmount! 1035 sqft bungalow with double detached garage backing a park is ready for you to call home! 3 generous sized bedrooms up, and your master has a walk in closet, which is rare in a home of this age! Beautiful character has been preserved with coved ceilings, original hardwood floors throughout the main floor, and brand new lino in the kitchen. Downstairs is a fully developed in-law suite with two bedrooms, and a spacious open kitchen into the living area. Basement has a 4 piece bath, with shared laundry area, a furnace that's about 5 years old, and a newer hot water tank. The back yard is very private with large trees, and 6 ft privacy fence. Enjoy quiet fall evenings in the yard around the fire pit. Out your backyard is an off leash dog park to add to your private retreat in the city!

Calgary

$339,900
954 sqft house with finished basement
older house (1911)
3.1 km from downtown


Completely renovated home with a total of 3 bedrooms. Upper floor with huge living room with high ceilings and lots of character! Re done kitchen with stainless steel appliances. Good sized master bedroom and den or dining room. Basement is fully finished with 2 bedrooms, family room and completely renovated 4pc bathroom. Huge yard with single detached garage with electrical and gas hook ups. New furnace and hot water tank. ~Drive by ******* Ave NW~


"Vancouver"

$329,000
1415 sqft* no basement
Actually located in Surrey (24 km to downtown)





Over 1400 sqft. 3 bdrm rancher with loft on a big fully fenced 8000sqft lot. This home has had many upgrades: vinyl siding, newer roof, flooring, hot water tank, decking & more. Large South facing backyard. Close to all amenities, school, shopping, transportation. All measurements approx buyer to verify.

Toronto

$334,900
9.2km from downtown



** Well Maintained 2-Bedroom Bungalow In Demand Location ** Hardwood And Ceramic Floors ** Home Rewired 2009 ** 100 Amp Breakers ** New Cac And Furnace 2009 ** Some New Windows ** New Front Door**Updated Roof ** Wrought Iron Fence At Front ** Updated Bath ** Well Kept Home! ****** EXTRAS **** ** Fridge ** Stove ** New Washer ** New Dryer ** Microwave ** All Window Coverings ** All Light Fixtures ** New Furance And Cac **

Real estate downturn hits the economy

The strong economic recovery highlighted in this post has stalled. I assumed a reversal in housing activity to slow down the entire economy but still remain in positive growth. That is now being tested with negative results showing up in some key reports.

Leading indicators (July 2010)

The composite leading index slowed to a 0.4% increase in July, after a gain of 0.7% in June. Most of the slowdown originated in the household sector, where three components fell. None of the seven other components decreased.

Jobs (July 2010)

The number of workers in the education sector was down by 65,000 in July. The large drop in educational services in July was spread across several occupation groups, including educational assistants, teachers and administrators in primary and secondary schools as well as custodial staff.

In July, employment decreased in finance, insurance, real estate and leasing (-30,000), bringing employment in this industry back to its July 2009 level.

(I expect next months report to be better because the loss of 65,000 educational jobs is unlikely to be repeated)

GDP (May 2010)

Sales of existing homes fell significantly in several parts of the country in May, resulting in an 11.3% decrease in the output of real estate agents and brokers. This marked the fifth consecutive monthly decline in this industry.

The question is whether this is leading to a double dip recession or just a slowing in the rate of growth.

Relax

Gregory Klump, chief economist of the Canadian Real Estate Association, is telling Canadians to relax when it comes to housing. Read the report found on Mike Fotiou's blog and then watch this video.



So just relax, OK?

The report argues the diversion in home prices versus income is part of a normal housing cycle that will unwind with stagnate prices and rising income. The chart used to back up this premise shows these variables over time. Initially, I was surprised the gap between them appeared small enough to support this theory.


It turns out that the income statistic used here hides the difference between these two variables over time and conveniently implies a less severe downturn. Between 1980 and 2005 the index for income increases from roughly 55 to 225. An increase of over 4 times is definitely not typical over this 25 year period characterized by flat real wages.

I suspect the data used here is wages and salary and supplement labour income from statscan which matches what is charted above (between Q1 1997 and 2009). This is total income of a growing labour force and therefore will increase faster than individual incomes over time.




A reasonable source would be full-time, full year median earnings because it represents typical earnings over time, not aggregate earnings. Total labour income also hides the fact that virtually all wage growth over 25 years has been from top earners. Median income has barely changed in real terms for 25 years, moving from from $41,348 in 1980 to $41,401 in 2005. I converted to nominal using CPI tables from statscan.

full time, full year median earnings (nominal)
1980 $17,003
1990 $29,878
2000 $36,058
2005 $41,401

After this adjustment median income between 1980 and 2005 increased 2.4 times, much less than the 4.2 times of total labour income. I have added this series to CREA's chart to illustrate the difference below.



What is astounding here is even after selecting this convenient data for the study he has the nerve to criticize others who have looked into this relationship.

Warnings of a U.S.-style home price correction in Canada are unfounded. Such warnings are typically based on a limited analysis of the historical relationship between national average home prices and income which ignores Canadian housing market cycle dynamics.

It doesn't matter how sophisticated your analysis is when your data sources are distorted!