Since when can $60,000 income afford $340,000 house?

[omisimaw]

ah yes debt load, the one absolute unknown but then a life on plastic is what many $60000 + wage earners know isn't it .... too bad they do not think about that along the way....

[Liquidnails]

I don't feel like I can afford a house unless I can have it paid off in 10 years. 25 is way too long to be tied to a place.

[kgcayenne]

You would be surprised how fast 10 years goes by, the next 15 doesn't seem so bad after the first 10. If you opt for bi-weekly accelerated, 25 turns into 17.

[omisimaw]

I don't feel like I can afford a house unless I can have it paid off in 10 years. 25 is way too long to be tied to a place.

Nothing nailing your feet to the floor for the full full term of a mortgage.

[hobbyguy]

Interesting calculation:

When interest rates were 18% I had a $100,000 mortgage. The base payments according to this calculator: http://www.canadamortgage.com/calculators/amortization.cgi were exactly the same as as a $300,000 mortgage at today's 3.25% rate.

And I certainly wasn't making 60K at the time...a whole lot less and eating lots of KD...

'Tis never easy when you're starting out.

[Static]

Row housing LOL yup rack and stack and look as ugly as sin on the landscape.... coming to YOUR neighbourhood soon with the mindset of the noveau developer mindset. Flash forward 25 years and ugly will just get older and uglier ... so educate all you want by NIMBY!

You clearly have never travelled.

[omisimaw]

What would it have to do with where a person has traveled ...

[kgcayenne]

I think the poster wants you to consider that many other places do this well. Yet at the same time, I have to wonder if Kelowna could pull it off, or does it really have the seedy little undercurrent I think it does.

[Static]

What would it have to do with where a person has traveled ...

Because there are very nice Row house neighborhoods.

[Static]

Interesting calculation:

When interest rates were 18% I had a $100,000 mortgage. The base payments according to this calculator: http://www.canadamortgage.com/calculators/amortization.cgi were exactly the same as as a $300,000 mortgage at today's 3.25% rate.

And I certainly wasn't making 60K at the time...a whole lot less and eating lots of KD...

'Tis never easy when you're starting out.

The falling interest rates is what helped created climbing home prices. The opposite will occur when interest rates increase. Of course rising incomes played a factor but we will not experience the same level of rising incomes we did over the last 30 years.

[hobbyguy]

Static, I agree with the sentiment regarding interest rates.

We also still seem to have the general sentiment that real estate always goes up.

Real Price Index:

1970 = 100

Canada - 235 UK - 210 US - 130 (peaked at 200) Japan - 85 (peaked at 160)

Not a wonder that the IMF etc. are worried about both Canadian and UK real estate prices.

Even with the super low rates the US hasn't been able to recover pricing levels. Arguably, if it weren't for the extraordinarily low rates, US real price (inflation adjusted) index would be about 110-115. If you look at comparables in the US, Canadian are totally out to lunch.

One that I know of: 3,200 sq ft rancher in Mesa. Gated community. Prime location. Backs onto an artificial lake. Fully renovated and equipped with top quality updates. Close to all amenities, on site golf course. Estimated value? $341,000 USD.

Historically, from 1970 through to 2007, Canadian home prices followed the same pattern as US prices in real terms. The maximum diversion from US real price index numbers being about 20% lower in Canada the early 1980's. For most of that time period Canadian real prices were somewhat lower than US prices, reflecting lower real median incomes.

The diversion in real price index that we see today is unprecedented. The diversion is roughly 80% to the high side. To make matters worse, prices in Canada continued their upward push through the second qtr of 2014, while US prices have turned down for a couple of quarters.

I could make a case for Canadian real prices being up to 20% higher than in the US due to much higher health care costs in the US. BUT, US median incomes measured by purchasing power are about 5% higher - which would support an equivalently higher price. So to me, the realistic maximum would be about 15% higher in Canada.

During the 1970 - 2007 period, whenever Canadian real prices exceeded US real prices by 15%, they quickly retreated.

The indications are then that the maximum real price index for Canada should be around 150, and it should have been following the US lower this year.

The implication is that Canadian real prices are indeed in bubble territory. Corollary to that , the correction should be in the 35% range?? If that happened, the $340,000 house would fall to $220,000 - bringing it well within the affordability range for most folks. Scary thought for many though, and a lot of other implications.

I'm certainly not the only one who see's it that way: http://www.huffingtonpost.ca/2014/09/23/canada-housing-bubble-cmhc-evan-siddall_n_5864066.html

[Static]

Ben S. Bernanke said the mortgage market is so tight that even he is having a hard time refinancing his own home loan.
The former Federal Reserve chairman, speaking at a conference in Chicago yesterday, told moderator Mark Zandi of Moody’s Analytics Inc. -- “just between the two of us” -- that “I recently tried to refinance my mortgage and I was unsuccessful in doing so.”

When the audience laughed, Bernanke said, “I’m not making that up.”
“I think it’s entirely possible” that lenders “may have gone a little bit too far on mortgage credit conditions,” he said.

Bernanke, addressing a conference of the National Investment Center for Seniors Housing and Care in Chicago yesterday, said that the first-time home buyer market is “not what it should be” as the economy in general strengthens.
“The housing area is one area where regulation has not yet got it right,” Bernanke said. “I think the tightness of mortgage credit, lending is still probably excessive.”