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Homes in Edmonton, Saskatoon most overvalued

ROMA LUCIW

Globe and Mail Update

Latest comment posted at 2:49 PM EST 13/09/07

Housing valuations are above their long-term trend, raising the risk of slower price gains, Scotiabank says ...Read the full article

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  1. Edward Thomas from Kingston, writes: The worm has finally turned on overheated, low-interest fattened valuations. The market is catching up to economic reality. This is a healthy development for the long-term sustainability of the retail and service sector (i.e. so consumers aren't crushed by their housing costs). In the meantime, I'll keep renting until average home prices come back down to historical norms of 3 to 3.5 times average gross incomes -- that implies an adjusted-by-purchasing-power price reduction of 20-30 per cent depending on the spread between wage increases, inflation and housing appreciation/depreciation.... I'm guessing it'll take two to three years for a correction of that magnitude to work its way through the marketplace.
  2. Bob K from United States writes: Finally, someone steps up and acknowledges the real estate market in Canada is in for a fall just like US. Double digit increases year after year are unhealthy. It is absurd some Canadians seem to take the aititude they are simply above any problems the US might have. Talk about irrational exuberance. The average price of an exisitng home in Canada is over $311,495 CDN as of July. It is only 228,900 US as of July in the US and they have the benefit of mortgage and property tax deductions. Seems to me home prices in Canada are even more out of sync with incomes than in the US.

    Have a nice fall.
  3. Bill NotGates from Canada writes: You would think that markets like Vancouver would have dropped a long time ago using the affordability logic. You read that it now takes up to 73% of pretax income to pay for a home & costs in Vancouver. My guess is that the RBC report will only provide a clue about price appreciation, but not the whole picture. The real formula is based on economic conditions, the ability of a market to attract new people and of course limitations on construction of new property. Who knows for sure, perhaps the situation in the US is a bell weather for Canada.
  4. John H from Canada writes: 1st two posters were right on the money!
  5. Proud Canadian from United States writes: If it brings down my property taxes on my rental properties then lower valutations are great!!
  6. Dick Dupa from Toronto, Canada writes: Bill NotGates: you quoting banks stating: ' You read that it now takes up to 73% of pretax income to pay for a home & costs in Vancouver'.
    This would explain why there are so many grow-ups and food banks being extensively used in Lower Mainland. Simply people do not disclose their sources of income, cause 70% pr-tax = 100% after tax.
  7. Roland Neissinger from Latteville, Canada writes: Proud Canadian from United States writes: If it brings down my property taxes on my rental properties then lower valutations are great!!

    Does it really? To my experience taxes have never gone anywhere except up as there are too many suckers feeding on that through.... but then you said 'IF'......

    Otherwise great news for renters to get out under the 'monthly lost money' yoke and buy something for themselves.

    Bad news for speculators who jumped into same old trap like back in the early 80ties.......

    Not so great news for some Real Estate Agents, who squandered their winfall over the last 10 years or so......

    Expect however some frantic/panicky last minute selling to grease the slide to lower housing prices for a while when it happens.....
  8. Dawn Lotus from Canada writes: Roland Neissinger and Proud Canadian, yes it actually should bring your taxes down if property taxes in your province are determined via an assessment of the value of the property. This is the case in Ontario. Whether it's the case elsewhere -I don't know. While that would give a break to the taxpayer, it will also decrease revenues for municipalities who rely on them. Whether they will increase the rate or pursue other sources (read: cutting services or taxing other things instead) is open to debate. So Roland Neissinger, in that sense you are probably right.
  9. Bruce Banner from Toronto, Canada writes: Headline: 'Canadian house prices ripe for a fall'
    1st sentence: '...hotter than they should be and, in SOME parts of the country, overvaluation MAY lead to a drop in prices, a report PREDICTED.'
    2nd sentence: 'The RISK of an eventual SOFTENING in the market comes as...'
    3rd sentenence: 'Scotia is PREDICTING a COOLING, not a collapse. Fundamentals remain SOLID.'
    Dont wet your pants yet everyone. The major markets like Vancouver (limited space) and Toronto (greenbelt) with all their immigrants will not see any major drops like 20-30%(?!). More sensationalism by a media trying to prompt a crisis in consumer confidence so they can report on the misery of a recession.
  10. R Moore from Canada writes: If the price of materials and labour come down then so will the price of homes. But comparing European prices to here makes one wonder. Also I have never heard of property taxes going lower either. There are many speculators in the market now who must be getting nervous now.
  11. Vickky Angstrom from Canada writes: Wow, the twelve year housing cycle in Canada is right on schedule and the Einsteins at Scotia have noticed that it is year 11. How do they do it?
  12. Rich M from Toronto, Canada writes: From Yesterday's National Post:

    According to the RBC study, Vancouver is the most expensive market in the country. A standard two-storey home worth $609,092 eats up 73.3% of average the average pretax household income in the city. That's up from 68% a quarter earlier. To qualify to buy the home you would need household income of $133,584.

    This would account for less than 10% of canadian households that would be able to buy a place in Vancouver. Notice I didn't say live in vancouver, because with 73.3% going to your mortgage there is not much living going on outside that.

    Hence the reason why more people - especially from Toronto are moving to the other coast. For Example, the same house (if not nicer) in Halifax would go for about $350K-$400K. Besides the fact that the beaches are nicer in the east, the weather is better and people are more friendly.

    Sure, Vancouver has the mountains to look at. I would rather take the $250K I save in buying a house and get a nice painting for my living room to look at............
  13. Ramesh Fernando from Canada writes: While Alberta and Vancouver may have a big drop if the economy slows down, I think the other markets will have smaller corrections. Not to the level of major US cities. What would be noted is that price increases should go to zero medium term which in reality with inflation is a price drop and at best only increase to above inflation in the long-term. So all the people buying houses now and 2008 will never earn any capital gains.
  14. Paul G from Toronto, Canada writes: About 15 years ago I switched away from the Bank of Nova Scotia not long after I became self-employed. I was glad I did because a year later the branch manager was fired due to ongoing problems there.
    I wouldn't trust a word that ScotiaBank has to say...
  15. bill k from toronto, Canada writes: Housing prices have been dropping already but now the reality is so strong they can not lie with their propaganda and it makes the RE agents job easier to tell clients that the bubble has popped and you need to CONTINUE to LOWER your price. There are so many homes which sit EMPTY on MLS and sellers are fighting each other for the few remaining buyers. This lol report looks very similar to the first reports that came out of the US with their 'PREDICTING a COOLING, not a collapse.' and we all know what happened. POP....what was that?
  16. Smooth Fan from Toronto, Canada writes: Bruce Banner: You're completely right for reading EXACTLY what was said and for pointing it out. All economic indicators are showing strength in the economy and this article is a BROAD generalization of what can/may happen.

    There's a report by Genworth Financial (Dec 06 I believe) that I read thorough recently that discusses the various factors influencing the housing market prices and they're take is that things will slow down a bit, but still remain strong and prices will continue to go up. I think everyone should relax, and unless you live in Vancouver, don't worry about Vancouver.

    As for the property taxes discussion, yes they do go down if the value of your house goes down (as per your assessment). Taxes are a function of size of unit/house, land occupied and if people recall there was a big uproar because people had to pay higher property taxes a few years ago because the values weren't assessed properly. So if value goes down, so will property taxes.
  17. Was Canadian from New York, United States writes: Dick Dupa - don't forget the illegal 'suites' in the basement!

    46% pre-tax income is crazy.
    73% pre-tax income is insane.

    I would be interested to know, from other posters on this board, how much do YOU spend on housing as a % of pre-tax income?
  18. Hugh Campbell from Canada writes: Bruce Banner from Toronto, Canada writes: Headline: 'More sensationalism by a media trying to prompt a crisis in consumer confidence so they can report on the misery of a recession.'

    And here I was thinking it was an Iron Triangle conspiracy, between main-stream media, the finance industry and car manufacturers/developers, promoting infinite growth ...
  19. Paul G from Toronto, Canada writes: bill k from toronto sounds crazy... just who are 'they'?
    I live on a street of semi-detached houses, one just sold yesterday at the highest price here so far after listed just one week. It fetched nearly half a million dollars!
  20. imagine there's from victoria, Canada writes: 'Canadian home prices are running hotter than they should be and, in some parts of the country, overvaluation will lead to slower price gains, a report predicted Thursday.'

    Love understatement.

    Do you know what happened in Tokyo? You heard about that bubble.

    A house bought in a suburb of Tokyo for 500,000 in the late 1970s went to
    2,000,000 by 1989 and then down to 700,000 in 2000.

    Real estate rose for 2000 years then bubbled and then crashed.

    Anything can happen.

    Dont kid yourself.
  21. Bernard B from Canada writes: Hi Paul G from Toronto, Toronto prices seem pretty stable. I don't think there will be a drop, but I think recent buyers who expect to sell soon may be disappointed. That said I think that the current environment may scare off that type of attitude for a while. I am however less certain about the 905 region just outside the immediate GTA.
  22. bill k from toronto, Canada writes: I find it funny how people wish to delude themselves of the reality of the housing market. Take a good look on MLS and you will see many empty homes and prices are dropping plus home are being sold for less. Ask the RE agent to do a search on homes that have sold and at what price. You will be amazed at how ill informed you are paul G from Toronto. Fact is paul G if you were one of the suckers who just bought expect losses real soon. POP....what was that?
  23. Phil S from Toronto, Canada writes: To bill k from toronto: I've been waiting for years to upgrade from my little condo to either a larger condo or possibly a townhouse, so I periodically check the listings to see what's available. Anecdotally from what I've seen, prime real estate (ie. along the subway line, along the waterfront, in the wealthy or yuppy neighbourhoods) keep going up and up. But outside of the prime areas, I would agree with you that prices have already started to fall. My problem is - I personally don't want to buy a place that isn't in one of the neighbourhoods that I like, so I'm not willing to buy a larger but cheaper place in a crappy area.
  24. Paul G from Toronto, Canada writes: If I was to listen to bill k from toronto, then I would be a sucker. His rants are no different than hundreds of other Chicken Little posts that have appeared here for over three years now.
    Early last year the G&M reported that recession was stalking Ontario. I still laugh whenever I have to wait in line in a restaurant or at most stores.
    If you want to shoot craps bill k then go to a casino and stay out of the real estate market where the law of supply and demand is at work.
  25. Sublime from Vancouver from Canada writes: ...isn't this story going to be followed shortly by its polar opposite stating that the economy is outperforming and house prices are expected to ride to new levels?....seems to be the way with G&M lately. I still don't understand why people want to see Canada as a national housing market...seems to me that it is far more an aggregate of distinct regional markets with different economies and factors affecting house prices. Try to tell Albertans that their hosing market is about to crash because their economy is at risk...
  26. Dan Shortt from Toronto, Canada writes: Canadian home prices are running hotter than they should be? You don't say ... Why just last week the news was that the housing market had no place to go but up, up, up ....

    Good-day to anybody west of New Brunswick who bought a house in 2007 - you just paid more than the place was worth. You'll find that out in the next year or two ...

    Financial analyists are finally starting to align their words with the facts on the ground. Shouldn't be long now before the Real Estate agents follow suit. You can only deny the truth for so long.
  27. Larry Robinson from White Rock, Canada writes: Sublime - this is a nothing story. I would hope that a 'hot' market eventually cools to rational price increases. The article still reports a 7% increase, nationally, for July.
    You are right about the irrelevance of a national market. What happens on the coast has nothing to do with the rest of Canada and the Okanagen is another distinct market.
    Of course nobody is mentioning that we are now in September and every year since 2000, looking at my graphs, the market pulls back in the autumn and fires up about March. 2007 is similar to 2003 in that the peak lasted longer.
  28. Small Business from Calgary, Canada writes: In Cowtown, the average and median prices of a single family home are already down 6% and 3% from their June peak. The inventory of listings just grows and grows every day, while the sales fall off (much worse in Edmonton where the market really went out of control this year). One of the local homebuilders was quoted in the paper stating they still see 8% increases in 2008, as if they could command it at will. Should be interesting to see where it ends up...one thing is for certain - the BS from the real estate 'professionals' over the next few months will be good for a few laughs.
  29. J Kay from Canada writes: One thing to note in RBC's housing affordability index which isn't obvious nor I believe explicity stated in any articles referring to it, is that the housing affordability measure is based on median incomes and average house prices. This may lead to a slight distortion of the affordability measure as home prices like incomes are not normally distributed and those those higher end homes may be dragging the average price of a home used in the study higher, making the affordability look worse than it is.

    On the flip side however, it also assumes that the mortgage terms are 25 years and that people have made a 25% downpayment on the home purchase, which I suspect but am not certain is likely not the case. Deviations from this will have an effect. Longer ternors will improve (lower) their affordability measure, while lower downpayment percentages will significantly impact and deteriorate the affordability measure.

    Also note that it is only in metro areas (TO, OTT, Van, Cal, etc) where the measure includes, utilities, property taxes, principle and interest payments. In smaller municipalities, utilities and property taxes are excluded, so the smaller cities may appear to be better off than they are and are not directly comparable to the bigger cities.
  30. Mike H from Grande Prairie, AB, Canada writes: Proud Canadian from United States writes: If it brings down my property taxes on my rental properties then lower valutations are great!! '

    Hate to break it to you Proud Canadian, but property taxes aren't actually based on the value of your property. They are based on the value of your property vs the value of other properties in the same area and the Mill Rate set by the local municipality/city. IE) If the price of all houses goes up or the price of all houses goes down without a change in the financing needs of the municipality, you wouldn't see any change in your taxes. The city would just increase or decrease the mill rate as applicable.

    The only way your property taxes would go down is if the values of your rental properties fell faster than the values of other homes...which isn't really a good thing if you ask me.
  31. imagine there's from victoria, Canada writes: 'bill k from toronto, Canada writes: Housing prices have been dropping already but now the reality is so strong they can not lie with their propaganda..'

    Interesting. I was talking to from Edmonton this very a.m. who said house prices are starting to drop there as more homes are put on the market. Here in Victoria ludicrous house and condo prices are still going up. How about a small two-bedroom condo in a heritage conversion for C$380,000? Theres one across the street. The fellow who bought it by the way has to listen to his neighbours walk around over his head on hardwood floors. Just thought i would throw that in.

    We moved into this prime neighborhood in 2001 and so are lucky to have bought before the bubble began to grow. I would said that that basement unit is really worth about C$180,000. But what is anything worth?
  32. brokeback mountain from Canada writes: reasons for the housing price increase:
    1. real estate agents playing games on bidding, or encouraging the buyers to pay a lot more than what the properties are really worth.. like people are paying 230k for a bachelor in downtown toronto, that's insane
    2. real canadian users are competiting with foreign buyers who don't know enough about the toronto markets and are willing to pay a lot higher than the asking price in CASH, an extra $50k is nothing to these people as investors as they have too much cash to hide esp if their banks in local countries are paying negative interest rate in their savings account

    we have so much land in canada, it doesnt make any sense for the housing market to go like this
  33. Rick Czarnota from Calgary, writes: Was Canadian from New York, United States writes:

    I would be interested to know, from other posters on this board, how much do YOU spend on housing as a % of pre-tax income?

    I pay 24%.

    The calls from the chicken littles continues to be entertaining. The same people talking about a bubble bursting today were guaranteeing it was right around the corner 2 years ago...and 1 year ago...and 6 months ago.

    Look around the world at housing prices in major urban centers. Canada's are not high. All that happened over the course of the past two years is the areas where housing was undervalued such as Calgary saw exponential growth. Of course that isn't sustainable. Exponential curves almost always turn into S curves as we are now seeing.

    Price increases have stabilized and pulled back to sustainable levels. Despite what so many say there are still plenty of people who can afford houses at todays prices. For those who can't buy a condo or something cheaper.

    When did Canadians start to mistakenly think that everyone in the country should be able to buy a 3 bedroom bungalow in the most expensive markets of the country?
  34. Gary Dare from Portland, Oregon, Canada, writes: Bob K from United States writes, 'The average price of an exisitng home in Canada is over $311,495 CDN as of July. It is only 228,900 US as of July in the US and they have the benefit of mortgage and property tax deductions. Seems to me home prices in Canada are even more out of sync with incomes than in the US.' Actually, Canadian prices are clustered more tightly around urban markets than in the US, where there are well occupied suburban and rural areas that would be bush or agricultural areas in Canada. Those areas dilute the average. US$215K gets you a fixer-upper in SE Portland or a studio condo in Chicago. Do market-to-market comparisons and you will find that a modest, middle-sized city like Portland, Oregon has housing prices at the level of Toronto. Chicago, the most similar market to Toronto, is more expensive.
  35. True Grit from calgary, Canada writes: Proud Canadian from United States writes: If it brings down my property taxes on my rental properties then lower valutations are great!!

    Property taxes are suppose to be revenue neutral under the Market Value Assessment used by most cities. Therefore, your property taxes will not go down. Instead, your municipality will simply adjust its mill rate so that it continues to have enough revenue to pay its bills and provided its citizens with services.
  36. Peter Simpson from Vancouver, Canada writes: Aside from the standard economic consideration there are three somewhat newer factors. One is wealthy buyers from our global economy and where they want to live, retire or simply own property. The second is a significant shift of population within Canada. The third is the baby boom inheriting and blowing their parent's money on houses. If assumptions and calculations don't include these factors they are incomplete.
  37. True Grit from calgary, Canada writes: I pay 25.3%
  38. Ray S from Canada writes: Hey Edward, that's good thinking. You keep waiting. In three years, you may be able to afford a home according to your theory. Now add on the 10 years of rent payments you probably made to pay someone elses mortgage since you probably sat on your hands when prices started to rise in 2002.

    Over that period you could have purchased a home, and paid down the mortgage to a reasonable level to create some equity for yourself, but now you just spout off to make yourself feel better, when all the while you know you blew it with your sit on the fence attitude.

    Good luck to you.
  39. Gary Dare from Portland, Oregon, Canada, writes: Bob K from United States writes, '... in the US and they have the benefit of mortgage and property tax deductions.' P.S., I would like to add that these 'benefits' are factored into US home prices and inflate their value.

    Rich M writes, 'From Yesterday's National Post: According to the RBC study, Vancouver is the most expensive market in the country.' For US$600K, see what you would find in the Chicago area (the most expensive US market between coasts but not/far from THE most costly). In Portland, Oregon (the cheapest US west coast major market) that would be the average price for a decent but ordinary house in the Southwest (e.g., Goose Hollow).
  40. Ray S from Canada writes: I only pay the costs of running the house including property taxes. I paid off my mortgage last year. More of you should try and do that.
  41. The Bubble from Toronto, Canada writes: Concerns about a recession aren't just predicated on the housing market. What also is going to come to fruition is the insane amounts of money the international banking community has been putting into the market to keep it from crashing, the end of the war (hence the end of a lot of military industry in the states), what looks to be very predatory money manipulation by China and Russia, and let's not forget mother nature, she's coming to get us too. I have been trying to liquidate some RRSP's from a major Canadian bank and they are having some real issues and it's taking more time than even they said it would. There is a lot of smoke but the amount of bad money hiding in the system is really the killer. It's not a matter of whether there is going to be a recession, it's a matter of how big it's going to be. Canadian banks are a smug lot and it would serve them right to start hurting for the way they fleece the Canadian population, especially the poor.
  42. Was Canadian from New York, United States writes: Thanks Rick Czarnota and True Grit. I suspect that most people actually pay around 25% - but I'm just totally pulling that number out. . . Noted that the 78% is based on average home price and average income, and most people with average incomes aren't buying average homes.

    For the record, the average (that word again) in NYC is 78% - I currently rent and spend 6% (yes, six); but I'm looking for an upgrade so I'll be around 12%. If I was paying 46%, I'd be paying almost $13,000 a month; and that's just stupid.

    On the homeowner front, there was an interesting article in NY Times Magazine a couple of weeks ago - Appreciating Depreciation - noting homeowners may stop thinking of their houses as investments to sit back in and watch appreciate, and more as (gasp) homes to live their lives in.

    The article also notes that homes are valued on the basis of “what houses are selling for&8221;, and note it's another variation on the greater-fool theory. Since homes don't have revenue streams like companies do, there only way to determine its value is what the next guy/gal is willing to pay. It will be interesting to see how long the foolishness will last.
  43. Super Farmer from Canada writes: Rick Czarnota - most intelligent commentary by far.

    Ray S from Canada writes: I only pay the costs of running the house including property taxes. I paid off my mortgage last year. More of you should try and do that.

    In my case, paying off my mortgage early is not the best way to invest my money. Many people see this.
  44. Dale Tallon from Vancouver, Canada writes: As long as interest rates remain low it will be hard to see a sustained fall in real estate prices. In Vancouver the market continues to be more of a seller's market particularly in west side and city neighbourhoods. The condo market also seems well supported. But it is hard to understand how this will all be sustained. We bought our first house in TO when interest rates were 12% and lost 20% on it between when we bought it in 1989 and sold it in 1999. That being said our house in Vancouver increased in by 175% from the period when we bought it in 1999 to when we sold it in 2005 and bought another home. Is there any logic? I cannot see that the Vancouver market will decrease substantially as long as the economy is strong, interest rates are low, foreign buyers are investing and buyers are willing to be creative (or stupid) to purchase homes.

    Good luck to all you investors, but at the end of the day I own a home because I need a place to live and the value is irrelevant unless I am moving from the market that I am in to another market.
  45. Paul G from Toronto, Canada writes: brokeback mountain from Canada writes: '...we have so much land in canada, it doesnt make any sense for the housing market to go like this'

    What is the colour of the sky in your world??? How much of that land is serviceable? Just a thin strip near the U.S. border where portions are now frozen as green space.

    Anyone thinking that real estate will drop by a large margin anytime soon is out of touch...
  46. J Kay from Canada writes: I currently rent; pay about 11 - 12% for my place, however if I used household income then maybe 7 - 8%. The differential between the 30% average affordability and the 11% or so is currently being invested.

    Was Canadian: It's actually median incomes and average housing prices, at least using the RBC report (I can't comment on how NY affordability is calculated). I noted a few issues or at least caveats that need to be considered when evaluating these numbers because there are underlying assumptions behind them. As an aside, $340,000 per annum. Nice. thanks for sharing. :o What does $1700 (6%) in NY get you out of curiosity?
    Gary Dare: Always like your comments.
  47. gord winters from Canada writes: your house is over valued, and you live in edmonton... double ouch.
  48. Gary Dare from Portland, Oregon, Canada, writes: That homes are becoming overvalued in Edmonton and Saskatoon is an indication that folks are moving in from more expensive areas. We are seeing that in Portland, Oregon which is becoming more unaffordable than Chicago, based on local wages and costs, due to an influx of Californians (many are retirees flocking to the city, the Coast and Bend). Back home in Winnipeg, we are seeing growth from Ontario transfers but not the same push as (e.g.) Edmonton.
  49. Frankie @^_^@ from Canada writes: ALL YOU DUMMIES OUT THERE. Its the real estate association that is stoking the buy recommendatiopns on the housing industry. Why wouldnt they. They are getting all these fees for FREE. Even if a three story house which was leaning over like the tower of pisa went up for sale, they would say it had great potential at 1.5 million.
  50. Festina Lente from United States writes: Where is the proof that mortgage and property taxes are factored in the sale of homes? Malcolm McCallum in Florida.
  51. Crimson The-Red from Canada writes: Once upon a time, in the year 2000 a guy named Bob, who was a renter, decided to buy a house. He spent a year looking around and by that time house prices had gone up 15%, as they were previously very undervalued, so Bob frowned and waited for prices to go back down. Meanwhile Bob's rent kept going up. From the year 2000 to 2007, our story follows the following pattern; 2000 home prices go up 10% 2001 home prices go up 10% 2002 home prices go up 10% 2003 home prices go up 10% 2004 home prices go up 10% 2005 home prices go up 15% 2006 home prices go up 15% 2007 home prices go down 5% Then, having seen prices go down, Bob called vereyone who had previously bout a house in the market a 'sucker', proclaimed how smart he was to wait, then promptly put a 5% downpayment on a house and ran out to get a 40 year mortgage. Bob's twin brother Hob however, didn't buy a house. Hop's rent kept going up and after retiring, but not yet buying a house, due to rent affordability issues Hop eventually moved to the corner of Jane and Finch, where he tries to block out the gun play noise, yelling and slapping by crying himself to sleep each night. Hop is not to sure about his neighbours, but despite repeated muggings, fortunately they have not killed him yet. The moral of this story; 'To each his own'.
  52. Was Canadian from New York, United States writes: J Kay -
    Re your curiosity - $1700 gets you a 700 sq ft pre-war 1 bdrm walk-up in Brooklyn, no doorman, close to Prospect Park. I'm moving, paying double that in Manhattan for a 1-bdrm on the Upper West Side, near Central Park (hence the 12%).
    Interestingly, the cost to rent here versus cost to own is very close - I calculated a mortgage on my place would be around $1600, but then there's maintenance fees and tax. When I rented in Vancouver, I paid 1/3 - 1/2 of the mortgage cost (in both cases, price based on 20% down, market interest rate for 25 yrs and 'comparables' in the same building).
    I should invest, mostly I pay off student loans and the dog walker...
  53. doctor business from vancouver, Canada writes: Lucky them whose prices will soften. In Vancouver prices are insane. We really are reverting to the 19th Century robber baron era. 'Affordable housing' is this kind of euthemism we throw around when we like to pretend we are not deteriorating that way. Inevitably it means there will be less affordable housing. OR as the provinical housing minister calls it 'X-thousand more units, more than ever before.' Except those number are usually unrealistic projections and never include the even larger number 'Y-thousand' that have dissappeared.
  54. Rich M from Toronto, Canada writes: Gord Winters - great comment.

    The only thing worse than living in Edmonton would be living in Saskatoon.

    P.S. Anyone out there living in Winnipeg should not be laughing either.......
  55. George D from Canada writes: Was Canadian, you spend 25K a month on dog walker and student loans? Not bad! Either you have enormous student loans, or I need to consider a career change!

    I too spend about 25% on housing, and live in one of the nicer neighbourhoods in TO in a detached 2 storey. Funny thing is you would probably be spending about that percentage to live in a decent sized house in Manhattan, no?
  56. keith stringer from Cincinnati, United States writes: Gary Dare suggests that if you do market-to-market comparisons you will find that houses cost the same high amounts in American cities as in Canadian cities.

    Well, the median house price is about 140 thousand dollars averaged from the following American cities: Indianapolis, Cleveland, Pittsburgh, St. Louis, Dallas, Cincinnati, Houston and Tampa. And those are metropolitan-area cities with populations between 1 million and 5 million people. So where are the market-to-market matches supposed to be for them in Canada where Canadians are supposed to find Canadian houses for a median price of 140 thousand dollars? I would suggest that they do not exist.

    And actually, the very high prices affecting Canadian cities extend, as in expensive American cities, way out into the distant suburbs there: White Rock and North Delta are over 20 miles from Vancouver and the real estate prices are absolutely red hot there - as they are even way further up the valley (not just those 'tightly clustered' around Vancouver city limits) - same thing holds true for places that far from Toronto and in some directions around Calgary.
  57. Rick Clarke from Edmonton, Canada writes: Rich M from Toronto, Canada writes: Gord Winters - great comment.

    The only thing worse than living in Edmonton would be living in Saskatoon.

    --P.S. Anyone out there living in Winnipeg should not be laughing either....... '---------

    I can't understand why so many people hate Toronto.................
  58. Was Canadian from New York, United States writes: Hi George D - yes to huge student loans, and my dog walker is very cute ;)
    There are no houses in Manhattan! It's a city of apartments and renters. Interestingly, I am told I can afford a $1.1 million mortgage, the average apartment in Manhattan costs $1 million. The average household income is $78K, so I'm the actual average buyer for an average home and I make over 4 times the average household income. Take-home message, average income ain't gettin' ya an average anything (in Manhattan, nor would it appear, in Vancouver!). (And yes, the word of the day is AVERAGE!)

    My informal sampling seems to suggest 25% is the actual norm that people pay. Again meaning average people can't afford average homes in the locations cited.
  59. Steve Not an Alberta Redneck from Calgary, Canada writes: Property valuations in all western cities currently experiencing an oil boom are at serious risk. All one needs to understand is that a significant portion of the current housing stock - 15 to 20 % - is occupied by people deriving most or all of their income from building construction. Should demand for new home construction slacken, many of these jobs will end immediately. Anyone who knows the type of people in this sector, realizes that a large portion of them live from paycheque to paycheque. They are 'self employed' meaning no EI and welfare is the next step (unless they can engineer a WCB claim) Few pay all their taxes and many fail to report anything at all so they seldom save anything or it would just go to the gov't next time they were audited. Panic will set in and even jobs as a clerk at the 7-11 will not be available. In the early 80's, people blamed the NEP but this was primarily right wing bull. The oil boom ended everywhere and it ended before oil prices fell. The recession was often worse elsewhere than it was in Alberta but the locals didn't want to hear that - just wallow in their grief and blame others. I always know I'm dealing with an economically illiterate moron whenever I hear locals ranting on about the NEP. There were 27,000 empty homes in Edmonton. Try unloading in that market! I know several real estate speculators (parasites in actuality) who went from being multi millionaires to paupers in less than 6 months. Another purge is coming.
  60. Ray S from Canada writes: Super Farmer. The banks love you. I worked for them for years, and convinced, I mean counselled the customer not to pay off the mortgage and invest the funds.

    Nice try, especially when those same bankers are the one selling, I mean advising you on which crappy fund to invest your money, which should be used to payoff your mortgage. If you think the real estate market will go down, I can tell you so will your other investments, and then what????

    The only thing certain about paying your mortgage off is that it is paid and you don't have to pay anymore. If you don't pay it off and invest funds elsewhere, nothing is certain except the banks and fund managers will rip you off until you have nothing left.

    Good luck with that broken investment strategy, meanwhile I have an extra $2,500 a month in my pocket rather than the banks.
  61. Uncle Mike from Canada writes: The market, which is exactly what this has become since people stopped buying homes only for consumption and began to buy for investment, cannot continue at the current rate of appreciation. That's the essence of the article. For this bubble to burst you only need prices to stop appreciating, not necessary to retreat. That being said this market moves very slowly since transaction costs are high, so any correction will take a long time to unfold, but it could go on for a while. To those who think prices will continue to grow forever, don't base your theory on past history. Incomes haven't climbed nearly as much as house prices and the spread has never been as bad as it is today. Also, for all the excuses that people are moving to E-town, or so and so inherited $500K when mom died, remember that the appreciation in house prices happened globally. Almost every developed country experienced this boom as a result of low interest rates worldwide. Finally posters shouldn't attack eachother. I'm 25 years old and don't care for a 50-something spouting off about anyone who didn't buy before the boom is a moron.
  62. Rich M from Toronto, Canada writes: Rick Clarke - don't be upset at us Torontonians because you are stuck living in Edmonton.

    You (and anyone else) are free to leave Edmonton at any time, unless you guys are still snowed in from last January.
  63. Old Folksinger from Canada writes: “Historically, these areas (Edmonton and Saskatoon) have not had long-term strength,&8221; Ms. Warren said in an interview.

    This person is predicting the future on the basis of the past. That's like driving while looking through the rear view mirror.

    Historically Edmonton hasn't seen the effects of $80 oil and massive immigration to the city. Those are what has driven and are driving the real estate inflation.

    It may slow down (I hope it does for the new buyers) but there are no signs of deflation whatsoever. The rate of increase may slow but it ain't gonna go negative until oil drops to $40 - and stays there. Frikkin unlikely!
  64. Gary Dare from Portland, Oregon, Canada, writes: Keith Stringer writes, 'Well, the median house price is about 140 thousand dollars averaged from the following American cities: Indianapolis, Cleveland, Pittsburgh, St. Louis, Dallas, Cincinnati, Houston and Tampa.' Seattle, Portland (OR), SF-SJ Bay Area, Minneapolis-St. Paul, Milwaukee, Chicago, Boston, Washington (DC). I'll exclude LA, Orange County, New York City to keep the numbers low. Let's put it this way ... despite cheaper housing in most of the markets that you picked, why do people need subprime mortgages?
  65. Old Folksinger from Canada writes: Rich M from Toronto, Canada writes: a load of childish comments about Edmonton.

    Grow up Rich M.
  66. Gary Dare from Portland, Oregon, Canada, writes: Keith - also, I'll grant you Boise, Idaho. (:

    BTW, are you taking numbers off of the Fortune articles on CNN Money?
  67. George D from Canada writes: Was Canadian, my situation is comparable (~3X median), but my house is roughly 50% above the average. Different numbers, similar point.

    I thought there were some brownstones and homes like that in the village, but I guess those would be ridiculously expensive? When you say average apartment close to $1M, I guess that's 2-3 bedroom with 1500 sq ft, or am I overshooting again:)

    i think though that the point is that the average house should be significantly higher than the median income, since not everyone is a first time buyer and it's not factoring in inheritances and the like. If you look at Toronto historically, the ratio has been near and above 40% since 1985, and is now at close to 50%. In 1989, it was up near 70%, and hence crashed in subsequent years. From what I hear though, this isn't going to happen anytime soon in New York...
  68. Apu Nahasapeemapetilon from Vancouver, Canada writes: Rich M from Toronto, Canada writes: You (and anyone else) are free to leave Edmonton at any time, unless you guys are still snowed in from last January.

    Rich, IIRC, wasn't Toronto the Canadian city that called in the army because it was snowed it and couldn't clear the streets.
  69. Super Farmer from Canada writes: Ray S from Canada writes: Super Farmer. The banks love you. I worked for them for years, and convinced, I mean counselled the customer not to pay off the mortgage and invest the funds.

    Nice try, especially when those same bankers are the one selling, I mean advising you on which crappy fund to invest your money, which should be used to payoff your mortgage. If you think the real estate market will go down, I can tell you so will your other investments, and then what????

    The only thing certain about paying your mortgage off is that it is paid and you don't have to pay anymore. If you don't pay it off and invest funds elsewhere, nothing is certain except the banks and fund managers will rip you off until you have nothing left.

    Good luck with that broken investment strategy, meanwhile I have an extra $2,500 a month in my pocket rather than the banks.

    Don't be a tool. Do you think I take my investment advice from some drop gut stiff at my local Scotiabank branch. Anyhow, I absolutely believe you worked for banks for years - nice assumptions. I can imagine where the extra $2500/month is going.
  70. Crimson The-Red from Canada writes: Hey 'Was Canadian from New York, United States', your dog called, turns out that cute little tart of a dog walker was not actually walking your dog, just showing up and throwing your dog a milkbone...just thought you might want to know.
  71. Iso Quant from Canada writes: Haiving spent substantial time TO, Edmonton, Winnipeg and Stoon, I can tell you that TO would be the last of those 4 cities that I would live in.
  72. Larry Robinson from White Rock, Canada writes: 5.33%

    I bought a one year old warrantied 900 sq. ft. condo five years ago, have upgraded it and put my money into my savings, debt reduction and, most of all, enjoying life.

    I do not look upon a home as an investment if you have only one because if you sell, where do you live. I would like a house again, but I am very aware of the costs of upkeep to maintain the investment and the amount of interest paid to banks.

    I accept condo. living as the standard in a limited landbase situation such as the Fraser Valley, Vanouver.
  73. James P from Spruce Grove, Canada writes: Many predict the downfall of Alberta but they seem to overlook how much is being invested here. Oil and gas is the largest of course and at $150 billion over 10 years its hard to jump on the bandwagon of doom and gloom. Sure my home might not go up at 50% a year anymore. So what, I never expected to. I am confident it will not drop 50% anytime soon. Even if it does most here still would be in the black.
  74. J S from Canada writes: What's with the headline starting with 'But'? Why do I get so annoyed?
  75. W L from Richmond, Canada writes: I bought my appartment in 2002 and sold it last year. I invested my money to somewhere else. Personally, I don't want the house prices drop down too fast because I am not ready yet for another appartment or house. I am expecting the prices will start to drop in 2011 after the Olympic Games, and it may reach the bottom in 2013. That is the time for me to own my own house.
  76. Rick Czarnota from Calgary, writes: Vickky Angstrom from Canada writes: Wow, the twelve year housing cycle in Canada is right on schedule and the Einsteins at Scotia have noticed that it is year 11. How do they do it?

    Actually Vickky if you read the article it clearly states:

    'The current Canadian housing boom, which began nine years ago, has been the longest of the post-war era....'

    Guess that means 3 more years to go hey Vickky.
  77. Was Canadian from New York, United States writes: George D - great points, I've always rented and there's no inheritance in my past or future - I didn't get out of my own head when commenting.

    A few brownstones in the village ~$5 million, lots more smaller ones in Brooklyn, around $2.5 million. Rule of thumb is ~$1000/sq ft in Manhattan, $850/sq ft in Brooklyn (nice neighborhoods). $1M usually gets a 2 bdrm, 1 bath. Co-op fees are high, usually around $2/sq ft/month. I'm waiting for that NY crash! And for the 70 cent Cdn dollar. I'm not holding my breath for either though!

    Crimson the Red - my dog walker is male (I'm female), tart doesn't really describe him; sticking with the foodstuffs analogy, I'll go 'beefcake'.

    Larry Robinson - 5.33%. You are my new hero! No house-poor for you, and no better place than White Rock to get out and enjoy life!
  78. Larry Robinson from White Rock, Canada writes: Was Canadian - new construction, high end condo.s Coal Harbour, Vancouver $800-1000/sq. ft.

    My ratio when I owned a house was 22-25% but nobody adds in the costs of running and maintaining a home. Later in life, I had the money to put 60% down and substantially downsize. My parents, lifetime house owners, couldn't understand until I showed them the place then we went for lunch overlooking the ocean. They are thinking of selling after years of prized winning landscape and all the work.

    Spend a sunny afternoon staining the deck, doing the lawn and shrubs, or enjoying the sun at a marine drive bar after a work-out?? It wasn't a tough decision.
  79. J M from Vancouver, Canada writes: Housing is not 'unaffordable' -- that is just a simple calculation comparing average incomes with average prices and says nothing. The G&M just reported that Canada now has the highest percent of home ownership in history -- all those people have been able to afford a home. Those looking for a 20-30% drop are dreaming.
  80. Ray S from Canada writes: Super Farmer,

    Yes, imagine where that money must be going. Since I paid off my mortgage, I am sure it is going to purchase useless investments and crap I don't need. I surely have proven I can't handle my money.

    Who is the tool making that ridiculouse assumption? Can you spell irony?
  81. Larry Robinson from White Rock, Canada writes: It's not a question of affordability. It's a question of debt tolerance. Our tolerance for debt has increased significantly and the prices reflect that new philosophy.
  82. Dave Goulden from Canada writes: Precious Felicity...now tell us how you really feel.
  83. Mike H from Grande Prairie, AB, Canada writes: Ray S and Super Farmer. You are both right and you're also both wrong. Just like owning a home isn't always better than renting, paying off the mortgage quicker isn't always better than paying off the mortgage at a normal pace and investing the difference.

    It all comes down to the opportunity cost of those funds. Can you beat your mortgage rate on an after-tax basis consistently? If so, it makes more sense to invest your extra funds as opposed to pay down the mortgage quicker.

    Personally, I prefer an approach in the middle. I put about half of my extra cash against the mortgage and the other half gets invested. Cut 6 years off my mortgage plus I'm building up my investment account.

    To each their own though. Neither approach is the right approach for everyone. Just my thoughts anyway.

    Was Canadian, my GDS ratio is currently sitting around 27.8%. Though the fact that I am paying extra to my mortgage payment every month overstates that figure.
  84. Gavin S from Montreal, Canada writes: I find it rather bizarre that people from Toronto feel the need to diss other, smaller cities. I would imagine that people from New York would have better things to do than talk about how bad living in Minneapolis is. I'm not one of the TO haters on here...it's a great city. But as someone who has spent a lot of time in both Toronto and Edmonton, I can assure you the cities are more alike than you would think.
  85. William Hughes from Vancouver Island, Canada writes: I pay 7.8%, including taxes and utilities. (No mortgage)
  86. Gary Dare from Portland, Oregon, Canada, writes: J M writes, 'Housing is not 'unaffordable' -- that is just a simple calculation comparing average incomes with average prices and says nothing.' Forbes calculates an 'affordability' index (available on MSNBC's business web site) for US markets based on the mortgage that one can reasonably support versus the current market price(s). It can give an indicator of the housing market and the local economy. Chicago is still stable, with prices maintaining or slightly rising while sales have slowed. Which means that people looking for living quarters are buying but not the speculators. Forbes considers the Chicago market to be 'affordable'. The western Oregon market remai