Canadian Home Buyers Now Need To Earn $150,000 CAD ($120,000 USD) Per Year To Buy A “Typical” Home

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You did it! You convinced your parents to gamble their retirement by pitching you a downpayment. Now all you need is to qualify to carry a mortgage, right? That might be a problem according to Q1 2022 data from National Bank of Canada (NBF). Carrying a mortgage on a typical home now requires a minimum income 50% larger than the median family currently makes. That’s across Canada’s cities too, not Toronto or Vancouver. A typical home in those cities requires closer to a quarter mil per year.

Lifestyles of the rich and famous bungalow owners, right?

Your Household Needs To Earn $154k/Year To Own A Typical Home

Canadian real estate is experiencing the worst affordability in over a generation. It worsened 4.9 points in Q1 2022, marking the biggest deterioration in over 27 years. According to the bank, affordability over the past year eroded at the fastest pace in at least 40 years.

A typical home now requires more than half a household’s family income for the first time since the early 90s. If you’re thinking well, at least it’s been this bad before — not exactly. Canada is an older country now, so the median income slants higher to more experienced (likely) homeowners. Since you’re probably younger than the median, you most likely make less. More succinctly worded, younger buyers likely have it a lot worse today.

Alright, Egghead — what does that mean? A typical household needs to earn $154,400 in annual income just to be able to afford to service the mortgage in Q1 2022. That’s an increase of 18.0% (+$23,500) from last year, so hopefully your household income jumped by a fifth.

Remember, this is after the downpayment is secured and assumes you have no other debt. Regular loan payments, such as a car or student loan? You’ll need more income.

Toronto Or Vancouver Mortgages Need At Least $211,600 Per Year

Yes, those previous numbers were for a typical home across Canada’s major cities. If you want something in Toronto or Vancouver, you’ll need a lot more. Toronto required a minimum household income of $211,600 per year as of Q1 2022, up 23.2% (+$39,800) from last year. Vancouver is even a little steeper at $228,600, up 18.6% (+$35,800) over the same period.

To be brutally honest, most young people in Canada will never be able to own a home in these two cities. Households need more than double the median income just for the mortgage payments on a typical home. If you’re not a high earner but still want a home, may we suggest somewhere more affordable — like New York City?

Hamilton and Victoria Real Estate Doesn’t Provide Much Relief

Toronto and Vancouver residents were flooding smaller cities before 2020. However, prices have increased much faster than the cities they fled, making it a much less attractive escape. Hamilton, Ontario now requires a minimum annual household income of $183,300, up 26.8% (+$38,700). Victoria, BC reached a little higher at $190,400, up 5.8% (+$10,500) from last year. Cheaper than Toronto or Vancouver, but still nearly double the median income.

Canada’s Most Affordable Cities Are Quebec & Winnipeg

The most affordable cities to buy in are now Quebec and Winnipeg. In Quebec City, a household income of $69,900, up 11.3% (+$7,100), is still enough to carry a mortgage across the country. Feeling rich? Splurging on pricier Winnipeg only requires a median household income of $79,800, up 12.7% ($9,000) from last year.

Most likely a lot of questions about what happens next with higher interest rates. Typically higher interest rates will increase the cost of debt servicing. If prices don’t fall faster than mortgage rates rise, affordability worsens. However, higher interest rates also slow demand and erode leverage.

Investors, about a third of buyers, will find housing much less attractive. Especially negative cash flow ones, that have been relying on appreciation. They’re more likely to realize some of their profits and put their excess property one the market. More supply with less leverage means lower prices. This is distinct from more supply with higher leverage, which can increase prices.

More succinctly, affordability will erode in the short-term but will improve long-term. This level of disconnect has never lasted forever, and this time isn’t different.

submitted by /u/NineteenSixtySix
[link] [comments]

Article You did it! You convinced your parents to gamble their retirement by pitching you a downpayment. Now all you need is to qualify to carry a mortgage, right? That might be a problem according to Q1 2022 data from National Bank of Canada (NBF). Carrying a mortgage on a typical home now requires a minimum income 50% larger than the median family currently makes. That’s across Canada’s cities too, not Toronto or Vancouver. A typical home in those cities requires closer to a quarter mil per year. Lifestyles of the rich and famous bungalow owners, right? Your Household Needs To Earn $154k/Year To Own A Typical Home Canadian real estate is experiencing the worst affordability in over a generation. It worsened 4.9 points in Q1 2022, marking the biggest deterioration in over 27 years. According to the bank, affordability over the past year eroded at the fastest pace in at least 40 years. A typical home now requires more than half a household’s family income for the first time since the early 90s. If you’re thinking well, at least it’s been this bad before — not exactly. Canada is an older country now, so the median income slants higher to more experienced (likely) homeowners. Since you’re probably younger than the median, you most likely make less. More succinctly worded, younger buyers likely have it a lot worse today. Alright, Egghead — what does that mean? A typical household needs to earn $154,400 in annual income just to be able to afford to service the mortgage in Q1 2022. That’s an increase of 18.0% (+$23,500) from last year, so hopefully your household income jumped by a fifth. Remember, this is after the downpayment is secured and assumes you have no other debt. Regular loan payments, such as a car or student loan? You’ll need more income. Toronto Or Vancouver Mortgages Need At Least $211,600 Per Year Yes, those previous numbers were for a typical home across Canada’s major cities. If you want something in Toronto or Vancouver, you’ll need a lot more. Toronto required a minimum household income of $211,600 per year as of Q1 2022, up 23.2% (+$39,800) from last year. Vancouver is even a little steeper at $228,600, up 18.6% (+$35,800) over the same period. To be brutally honest, most young people in Canada will never be able to own a home in these two cities. Households need more than double the median income just for the mortgage payments on a typical home. If you’re not a high earner but still want a home, may we suggest somewhere more affordable — like New York City? Hamilton and Victoria Real Estate Doesn’t Provide Much Relief Toronto and Vancouver residents were flooding smaller cities before 2020. However, prices have increased much faster than the cities they fled, making it a much less attractive escape. Hamilton, Ontario now requires a minimum annual household income of $183,300, up 26.8% (+$38,700). Victoria, BC reached a little higher at $190,400, up 5.8% (+$10,500) from last year. Cheaper than Toronto or Vancouver, but still nearly double the median income. Canada’s Most Affordable Cities Are Quebec & Winnipeg The most affordable cities to buy in are now Quebec and Winnipeg. In Quebec City, a household income of $69,900, up 11.3% (+$7,100), is still enough to carry a mortgage across the country. Feeling rich? Splurging on pricier Winnipeg only requires a median household income of $79,800, up 12.7% ($9,000) from last year. Most likely a lot of questions about what happens next with higher interest rates. Typically higher interest rates will increase the cost of debt servicing. If prices don’t fall faster than mortgage rates rise, affordability worsens. However, higher interest rates also slow demand and erode leverage. Investors, about a third of buyers, will find housing much less attractive. Especially negative cash flow ones, that have been relying on appreciation. They’re more likely to realize some of their profits and put their excess property one the market. More supply with less leverage means lower prices. This is distinct from more supply with higher leverage, which can increase prices. More succinctly, affordability will erode in the short-term but will improve long-term. This level of disconnect has never lasted forever, and this time isn’t different. submitted by /u/NineteenSixtySix [link] [comments]

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