Low interest rates are a form of economic junk food.
It’s true in the housing market, where low rates have glossed over a striking decline in affordability in the past two decades. A sustainably strong housing market is based on fundamentals like a reasonable match between growth in incomes and home prices, not the economic equivalent of fat and salt.
Most of us have at least a basic idea of how much house prices have gone up in recent years, but there’s been a lack of curiosity about how buyers are keeping up. For some perspective, let’s look at incomes as taken from Statistics Canada data on weekly earnings going back to 1997, and real estate price data supplied by the Canadian Real Estate Association.
Back in 1997, the average house price in Canada of $154,620 was about 4.9 times the average pretax annual income ($31,484) of an individual with a full-time job. For the year through July 31, the average price of $379,725 puts houses at about 7.8 times income. ($48,497, all figures in current dollars).
A reasonable long-term assumption is that houses will rise in price by the inflation rate every year on average, and that wages will more or less keep up with inflation. That would give us a kind of affordability equilibrium in the housing market.
But house prices have surged ahead of income. In the past 17 years, incomes have risen by an average annual rate of 2.6 per cent, while house prices have gone up 5.4 per cent. Put another way, house prices have more than doubled over that period, while incomes are up by just a bit more than half.
The surge in housing prices is the great gift of the global financial crisis five years ago. The crisis drove interest rates down to historic lows, thereby allowing buyers to shrug off a growing disparity between their incomes and the cost of buying a house. The availability of 30-, 35- and even 40-year mortgages a few years back also helped obscure the income-house price gap.
But rates have been the big stimulus for the housing market. The prime lending rate at banks and credit unions – it’s used to price variable-rate mortgages – fell as low as 2.25 per cent from 6.25 per cent in mid-2007 before edging back up to the current level of 3 per cent. The average posted rate for five-year fixed-rate mortgages fell to 5.14 per cent at mid-year from 7.24 per cent in 2007.
You can chop roughly 1.5 percentage points off those five-year fixed rates to get the discounted costs that borrowers typically pay. On a $400,000 mortgage, the decline in these discounted rates over the past five years would have saved a buyer about $470 per month.
That’s what kept houses affordable while prices left income growth behind. Can we keep living this way? A lot depends on interest rates. The Organization For Economic Co-operation and Development said last week that Canada may need to start pushing up rates next year, and that our central bank’s benchmark rate may need to more than double by the end of 2015.
But that almost certainly won’t happen. BMO Nesbitt Burns has interpreted the Bank of Canada’s latest words on rates to suggest that the status quo will rule for at least another year. So we’re good on housing, right?
Low rates were needed to stabilize the economy back in the financial crisis, and they may still be required. But let’s recognize that they’re having an unhealthy effect on housing by getting people into homes that are going to be tough to manage financially.
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2065169 – M9B – 982 KIPLING Avenue , TORONTO, ON – $ 635,000
Estate sale – must be sold – bring your offer! Location, Location, Location. Renovate or rebuild. Renew this 1950 s solid brick raised bungalow home to …
C2733535 – M5P – 18 HILLHOLM RD Toronto, Ontario – $ 3,849,000
Price Change. Nov 26: $ 3,849,000 Sep 24: $ 3,985,000
Magnificent Custom Built Stone Family Home On Large Lot On Forest Hills Hillholm Rd. Renowned Architect Richard Wengle. Steps To Ucc & Bss. 4550 Sf Of …
C2742262 – M6G – 98 WINONA DR Toronto, Ontario – $ 749,000
Price Change. Nov 26: $ 749,000 Sep 24: $ 799,000
Great Investment Opportunity, Family Owned Business Since 1986. Store Now Used As Pizza And Sandwich Take Out With Convenience Store. Business Included In …
C2761045 – M4A – 24 TISDALE AVE Toronto, Ontario – $ 574,900
Price Change. Nov 26: $ 574,900 Oct 20: $ 579,900 Oct 12: $ 599,900
Absolutely Stunning Home! East Face With Over 2300Sq Ft, Built 2012 Still Under Tarion Warranty. Shows 10+, Full Wash N Laundry In Mbr,Huge Living …
C2783700 – M2N – 67D FINCH AVE W Toronto, Ontario – $ 728,000
Price Change. Nov 14: $ 699,900 Nov 26: $ 728,000
Luxurious Bright, Spacious, 4 Bedroom Freehold Townhouse! High End Finishes, Many Upgrades, 9Ft Ceiling, Dark Hardwood Floors Throughout, Custom Kitchen, …
C2784392 – M2R – 53 DEVONDALE AVE Toronto, Ontario – $ 799,900
Price Change. Nov 26: $ 799,900 Nov 15: $ 869,000
Stunning Renovated Bungalow. Wow !! Rear 60 Ft X125 Ft Lotsize. 7,500 Sq Ft Lot Backing Onto Park. A Fantastic Location In North York. Minutes To Yonge …
C2790641 – M2P – 55 FAIRMEADOW AVE Toronto, Ontario – $ 1,998,800
Traditional, Elegant And Gracious Best Describes This Beautiful Residence In The Prestigious And Sought After York Mills/Yonge Neighbourhood. …
C2790661 – M2M – 56 GOSSAMER AVE Toronto, Ontario – $ 1,799,800
*Totally Rebuilt & Designed*Approx 8000Sf Of Luxury Living Area*Heated Indoor Pool + Spa*Elevator*Sauna*Wet Bar*Wine Cellar*Cedar Closet*2 …
C2790698 – M4N – 153 BOWOOD AVE Toronto, Ontario – $ 1,149,000
Great Opportunity To Own A Custom Built Home In One Of Toronto s Most Desirable Neighbourhoods. This Home Features 3 Bdrms, 4 Bathrooms, Main Floor …
C2790717 – M5M – 15 SAUNDERS ST Toronto, Ontario – $ 2,449,800
Another Unprecedented Masterpiece With Project Design & Built By One Of The Toronto s Most Reputable Builders, M.A. Homes Ltd., Is Offered For Sale In …
C2790775 – M3H – 23 ERICA AVE Toronto, Ontario – $ 879,999
Best Block In The Neighbourhood! Quiet Cul-De-Sac On The Park. Spacious 4 Bedroom Family …
C2790801 – M5M – 593 DELORAINE AVE Toronto, Ontario – $ 1,100,000
*Prime Bathurst/Lawrence! *Incredible Opportunity! *Fabulous 40X107 South Lot Just East Of Bathurst W/Much New Multi Million $ $ Development In …
C2790805 – M2K – 267 BURBANK DR Toronto, Ontario – $ 1,399,000
*Unique Architectural Design. Gorgeous Ravine Multi Level Custom Built Home On Most Secluded Cul De Sac! New Reno d Gourmet Kit W/High End S/S …
C2790879 – M2R – 45 GLENBOROUGH PARK CRES Toronto, Ontario – $ 919,000
Reno d 08-12.Over $ 250K Spent + Outdoor Coach House/Yoga/Art Studio Or Teen Suite.Open Stairs/Stainless Railings,3 Reno d Bathrms,Pot Lights,2 Modern …
C2790917 – M5R – 117 HILTON AVE Toronto, Ontario – $ 1,199,000
Delightful Duplex, 4 Levels Of Finished Space. 2 Elegant, Spacious Bi-Level Apartments W/T Fireplaces And Maple Floors. Potential Income Of Over $ 56,000 …
C2790943 – M4V – 370 RUSSELL HILL RD Toronto, Ontario – $ 3,269,000
Land Value Only.Opportunity To Build The Custom Home Of Your Dreams.Prestigious Address.In-Ground Bonavista Pool (17 X34 ).Close To The Best …
C2790971 – M4W – 1 BAXTER ST Toronto, Ontario – $ 949,000
Completely Renovated, Approx. 2100 Sq. Ft Of Bright Airy Living Quarters In The Beautifully Landscaped Courtyards Of Rosedale. Style & Comfort Describe …
C2790972 – M6C – 84 FAIRLEIGH CRES Toronto, Ontario – $ 789,000
Fantastic Opportunity To Build Your Dream Home Or Second Floor Addition. In A Very Unique Pocket Of Upper Forest Hill Village. Large Building Lot. …
C2791129 – M2H – 90 CASTLEBURY CRES Toronto, Ontario – $ 369,000
High Demand North York Neighbourhood. Step To A.Y. Jackson High School,Zion Middle School. Very Well Maintained W/ Low Monthly Fee Incl. Cable. Fully …
C2791136 – M4S – 246 FORMAN AVE Toronto, Ontario – $ 849,900
Stunning Reno In Davisville Village! Detached, 2 Storey, 3 Bedrm, 2 Bathrm Home W/ Rarely Offered Private Dr. & Bi Garage! Open Concept Main Flr W/ …
C2791220 – M2J – 21 URSA STARWAY Toronto, Ontario – $ 379,900
Bright, Spacious Family Home In Convenient Don Mills And Sheppard Area* Close To Fairview Mall, Dvp, 404, 401, Subway, Ttc, Schools * Large …
E2757023 – M1L – 22 BELANGER CRES Toronto, Ontario – $ 558,800
Price Change. Nov 26: $ 558,800 Oct 7: $ 568,500
Arista Built End Unit Freehold Townhouse!! Just Like A Semi!! Premium Lot!! Brand New!! Never Lived In!! Upgraded Hardwood Floors!! Upgraded Kitchen!! …
E2776603 – M1E – 405 BEECHGROVE DR Toronto, Ontario – $ 309,990
Price Change. Nov 26: $ 309,990 Nov 3: $ 329,990
Jasper Model – 2 Br, High Quality Finished. Close To Transportation, 401, Parks & Conservation Area, Also …
E2776607 – M1E – 405 BEECHGROVE DR Toronto, Ontario – $ 349,990
Price Change. Nov 26: $ 349,990 Nov 3: $ 369,990
Redwood Model. 2 Br + Den. High Quality Finished. Close To Transportation, 401, Park & Conservation Area, Also University Of …
E2777482 – M1M – 91 MUIR DR Toronto, Ontario – $ 145,000
Price Change. Nov 26: $ 145,000 Nov 5: $ 154,900
Opportunity Knocks!! Great Location; Close To All Amenities: Ttc At Door Steps, Schools, Go Train & …
E2777909 – M4C – 250 WESTLAKE AVE Toronto, Ontario – $ 1
Price Change. Nov 26: $ 1 Nov 6: $ 1,150,000
Wow!!! 4600 Sqft In Desirable Area. Potential To Extend Building Or Rebuild. Long Established Great Business. Owner Is Getting Retired. Great …
E2790603 – – $ 329,900
Price Change. Nov 26: $ 329,900 Nov 25: $ 334,900
Super Special Completely Done Professionally From Top To Bottom. Really Beautiful. This 3 Bedroom 2 Washrooms New Hardwood Floors With New …
E2790645 – M4M – 76 MUNRO ST Toronto, Ontario – $ 419,900
Location & Affordability *Munro Model 885 Sq Ft + Fabulous 258 Sq Ft Roof Top Terrace-Gas Bbq Hook Up, Family Friendly Munro St. Offers Easy Access To …
E2790663 – – $ 1,229,000
Luxurious 3500 Sqft Home! Italian Custom Built. 9Ft Dome Ceiling, Granite Floor! Marley Roof! Hardwood Floors! Crown Moulding! Wainscotting! Beautiful …
E2790680 – M4E – 60 FERNWOOD PARK AVE Toronto, Ontario – $ 574,900
Super Beach Location! South Of Queen! On A Pretty Tree Lined Street, Steps To The Lake And To Queen Street East! Home In Need Of Substantial Renovations! …
E2790697 – M2N – 129 GRADWELL DR Toronto, Ontario – $ 549,900
Total Reno From Top To Bottom* Stunning New Granite Kitchen With Stainless Steel Appliances*Walk Out To Rear Sun Deck With Hot Tub And A Beautifully …
E2790759 – M4C – 60 OAKCREST AVE Toronto, Ontario – $ 574,900
This Home Is Move-In Ready! Located In A Fantastic Family Friendly Neighbourhood With Convenient Access To The Danforth, Beaches, Uptown Or …
E2790809 – M1L – 39 NIXON HTS Toronto, Ontario – $ 549,900
Arista Built Freehold Townhouse!! Upgraded Hardwood Floors!! Family Size Kitchen!! Oak Staircase!! Main Flr Laundry !! Finished Main Level!! Excellent …
E2790820 – M1C – 102 STAGECOACH CIRC Toronto, Ontario – $ 455,000
Highland Creek Village Ravine. Freehold 3+1 Bdrm Townhome. Hrdwd Flr Thru-Out. Oak Staircase. Ground Flr Bdrm W/3Pc Washrm & W/O To Backyard. Fireplc In …
E2790836 – M1R – 14 FREY CRES Toronto, Ontario – $ 499,000
Location!!!Location!!!Location!!! Bright And Huge Bungalow, Hardwood Floor Throughout, Modern Washroom With Granite Top And …
E2790852 – – $ 154,900
Immaculate Condition, Romantic West “”Sunset View””, Huge Wall To Wall Windows, Quality Laminate Floor Throughout, Extremely …
E2790854 – M1N – 89 NATAL AVE Toronto, Ontario – $ 714,900
This Custom Built Home, Is Everything You Have Been Looking For. It Features Stunning Hardwood Floors Throughout, A Gourmet Kitchen Featuring Quartz …
E2790918 – M1E – 41 PAYZAC AVE Toronto, Ontario – $ 489,900
Gorgeous Bright Spacious Home With Loads Of Upgrades Throughout. Shows Like A Model. Huge Renovated Eat-In Kitchen With Granite Counters. New Hardwood …
E2790935 – M1E – 54 WESTCROFT DR Toronto, Ontario – $ 569,900
:Here It Is!!! Rarely Offered 5 Level Backsplit On A Premium 165 Lot. What A Great Family Home!! New Hardwood Floors, All Painted Plus A New Sep Living …
E2790951 – M4M – 1185 QUEEN ST E Toronto, Ontario – $ 698,000
New Custom Townhouse, Never Lived In, Stylish And Contemporary In The Leslieville Film District. Prime End Unit Featuring Luxurious Living Space, …
E2790965 – M4B – 43 JOANITH DR Toronto, Ontario – $ 899,000
Spacious 4 Bedroom, 5 Bathroom Home Located In Convenient East York Location! Almost 2000 Sq Ft Of Living Space Plus Basement!! Renovation/Top Up Done In …
E2791013 – M1V – 41 SUNBIRD CRES Toronto, Ontario – $ 779,000
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E2791030 – M4E – 194 SILVER BIRCH AVE Toronto, Ontario – $ 899,000
Absolute Perfection!! Totally Reno d Detached Three Bedroom Plus A Sun Room/Office, Gorgeous Finished Basement With Cork Floors & Separate Entrance. …
E2791032 – M1L – 55 BERTHA AVE Toronto, Ontario – $ 695,000
Newly Renovated 4 Bedroom In Quiet Family Neighbourhood. Just A Short Stroll To Warden Woods. Open Concept Main Floor. Many Wonderful …
E2791033 – M1V – 85 CAMPANIA CRES Toronto, Ontario – $ 569,000
This Is A 3 Beds Well Maintained Cosy Home With Professional Finished Basement In A Mature Neighbourhood, Sep Entrance To The Fin Bsmt, Upgraded Kitchen …
E2791082 – – $ 385,900
Great Home For Investment/First Time Buyer With Finished Basement And Separate Entrance – Spacious 3 Bedrooms, Kitchen – Well Kept By Owners. Very Large …
E2791101 – M1M – 16 FAIRCROFT BLVD Toronto, Ontario – $ 659,900
Live In The Bluffs! Impressive Completely Renovated Cape Cod Sitting On West Facing Estate Sized Lot. This Home Features Perfect Floor Plan For …
E2791110 – M4L – 238 KENILWORTH AVE Toronto, Ontario – $ 1,989,000
Spectacular Custom Home! Amazing Street Presence! More Than Stunning Kitchen/Family Room W/Custom Walnut Cabinetry/Pantry & Marble Counters, Custom …
E2791132 – M1E – 1 WAGNER DR Toronto, Ontario – $ 479,000
Excellent Curb Appeal. This Gorgeous 3 Level Sidesplit Home Is Located In A Mature Area Of West Hill-Extra Large Living Room With Hardwood Floors …
E2791159 – M1P – 40 DUNDALK DR Toronto, Ontario – $ 379,000
Rare 4 Bedrooms Condo Townhouse, With Largest Square Footage. Full Renovated Recently, W/ Many Upgrade. Hardwood Floor, Full New Kitchen Cabinet, Granit …
W2668860 – M9A – 72 EDENBRIDGE DR Toronto, Ontario – $ 2,399,000
Price Change. Nov 26: $ 2,399,000 Sep 24: $ 2,499,000
Luxurious Builders Home On Magnificent Lot In Prestigious Edenbridge / Humber Valley Area. Located On One Of The Most Sought After Streets. …
W2756776 – M6E – 195 BOON AVE Toronto, Ontario – $ 334,900
Price Change. Nov 26: $ 334,900 Oct 6: $ 349,900
Fantastic Starter Home In Great Neighbourhood! End Unit Townhome! 2 Bedroom, 1 Bathroom, Many Upgrades Throughout The Years. …
W2768423 – M8Z – 5 ABERLADY RD Toronto, Ontario – $ 699,900
Price Change. Nov 26: $ 699,900 Oct 23: $ 710,000
Rare Ranch Style Brick Bungalow With Wide Lot In Sought After Norseman Area With Attached Garage And Double Concrete Driveway,30 Ft Verandah Overlooking …
W2775156 – M6E – 248 CALEDONIA RD Toronto, Ontario – $ 489,000
Price Change. Nov 1: $ 425,000 Nov 26: $ 489,000
A Well Kept Home, With 3 Self Contained Units. Tenants Pay $ 2900 A …
W2787555 – M9V – 2901 KIPLING AVE Toronto, Ontario – $ 124,900
Price Change. Nov 26: $ 124,900 Nov 23: $ 129,000 Nov 20: $ 131,900
Great Value: Truly Gorgeous & Spacious Unit In A Luxury Building. Renovated. New Ceramic …
W2790749 – M9M – 34 REUBEN AVE Toronto, Ontario – $ 299,000
Home Bring Sold Primarily For Lot Value. If …
W2790757 – M6M – 54 PARKCHESTER RD Toronto, Ontario – $ 998,500
This Elegant Home Shows To Perfection.Extensively Renovated&Extended,In Absolute Move-In Condition.Stunning Open-Concept Mn Flr Boasts A Gourmet Kitch. …
W2790768 – M9M – 23 PARROTTA DR Toronto, Ontario – $ 449,900
Marvelous Executive Freehold Townhouse!! This Proud Home Is Very Well Maintained And Boasts Of Spacious Bedrooms, Oak Railings And Stairs. Windows Are …
W2790774 – M8Z – 93 RUBY LANG LANE Toronto, Ontario – $ 619,000
Just Move In Tomorrow To This Luxury Townhome Built By Dunpar. 1950 Sqft. Open Concept Main Floor With Crown Molding, Pot Lights And Gas Fireplace. …
W2790791 – M6P – 347 INDIAN ROAD CRES Toronto, Ontario – $ 599,900
Move Right In Or Make This House Your Own. Fabulous Home W Updated Wiring/Panel(08),Roof(11),Copper Pipes, Waterproofed 7 Bsmt W 4Pc Bath, Main Flr …
W2790823 – M6N – 33 SENECA AVE Toronto, Ontario – $ 499,000
Open The Door And Say Wow! Amazing Value For Toronto! Recent Extensive Renovation And Addition. Must See! Steps To Transit Very Well Located. Dream …
W2790829 – M6S – 5 BRALORNE CRES Toronto, Ontario – $ 589,000
Spotless And Super Clean, 3Bed Semi In High Demand Valley Nestled Between The Humber River And Bloor West Village. Same Owner For 51 Years, Ttc At Your …
W2790850 – M6S – 35 MAPLEVIEW AVE Toronto, Ontario – $ 529,900
Great Opportunity To Own A Home In Bloor West Village On A Quiet Street. Located Near Runnymede Public School, South Of Annette. House Needs Renovation-A …
W2790871 – M9B – 982 KIPLING AVE Toronto, Ontario – $ 635,000
Estate Sale-Must Be Sold-Bring Your Offer! Location,Location, Location. Renovate Or Rebuild. Renew This 1950 S Solid Brick Raised Bungalow Home To …
W2790894 – M9A – 54 POPLAR HEIGHTS DR Toronto, Ontario – $ 1,150,000
Sprawling 4 Bedroom 4 Bath Home In The Greens Of St. Georges Set On A 79 X 100 Sq Ft, Corner Lot. Spacious & Bright Principal Rooms, W/Hardwood Flrs. …
W2790944 – M9V – 59 VANGE CRES Toronto, Ontario – $ 429,900
*** Great Investment Property *** 3 Bedroom Detached Raised Bungalow With 3 Bedroom Finished Basement With Seperate …
W2790953 – M8V – 176 QUEENS AVE Toronto, Ontario – $ 929,900
Grand,Open-Concept 5Bdrm,4Bath Stucco Home In Desirable Mimico-By-The-Lake On A Mature Treed St.9 Ft Ceilings W/Crown Mouldings,Tiffany Wood Trim&Jatoba …
W2790969 – M9R – 46 PARAGON RD Toronto, Ontario – $ 625,000
Fantastic Home Nestled In Col De Sac Street And Quiet Neighbourhood, Ideal To Raise A Family, It Is …
W2791048 – M6N – 99 SCARLETT RD Toronto, Ontario – $ 499,000
. **** EXTRAS **** Stove, Fridge, Dishwasher, Washer, …
W2791060 – M9N – 36 CROSS ST Toronto, Ontario – $ 475,000
Amazing New Home With Old World Charm & Location Intact. Those Buyers Wishing For Something Brand New In The City Without The Dreaded Commute, Here It Is! …
W2791061 – M9P – 11 PEACH TREE PATH Toronto, Ontario – $ 369,900
islington Gardens Place Large Luxurious Semi-Detached Townhome With Great Floor Plan. Best Value For Your Money.!!!Gorgeous & Well Kept 3 Bdrm &3 …
W2791089 – M6N – 27 GRAY AVE Toronto, Ontario – $ 299,000
Location! Location! Attention – Handyman, Contractors & Renovators – Home Located In Quiet Family Oriented Area …
W2791128 – M9B – 30 SHAVER AVE S Toronto, Ontario – $ 1,299,900
This Beautifully Maintained Home Was Custom Built In 2002 On A Professionally Landscaped 50 X 150? East Facing Lot In …
W2791154 – M9B – 20 HEDGES BLVD Toronto, Ontario – $ 784,900
Unique Reno d/Upgraded 4+Bdrm Bungalow With Two Storey Back Addition(05) In Desirable Princess Margaret Locale. You ll Love The Quality Workmanship & …
W2791163 – M3M – 172 CALVINGTON DR Toronto, Ontario – $ 488,000
50 X 120 Lot, Sloping To Rear. Ideal For Work Out Basement. Build Your …
W2791192 – M4W – 24 SUNNYBRAE CRES Toronto, Ontario – $ 349,900
Large Semi On Huge Lot On Quiet Crescent Across From Park.1 Bdr Bsmt Apt With Side Entrance.Note Separate Liv & Din Rm.Huge Eat-In Kitchen(Renovated 2 …