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.