What you’ll notice is that the multiple hangs around 2x in periods of reasonable stability. To me, it seems clear from the charts that prices will continue to fall in many of these regions. A thought echoed by others. That last link also has a reasonable quote:
The simple truth is that median income should not exceed 3 to 5 times your bring home income (and that’s being generous).

I’m sure that many on this blog would argue that even the 3x to 5x should be one person’s income not both. 5x on two incomes is a very large financial burden.

So why am I answering your question with all of these numbers?

B/c this multiple is probably going to be the gauge of how “relatively” expensive housing is going to be. Here’s a chart for Housing Affordabiliy that lists 3x and under as the “affordable” number. The PDF report has a city-level breakdown of this multiple from Q3 2008. The report includes Canada (which is rare).

Take a look at the PDF, check out the Median Family Incomes by Province and you’ll get an idea of how expensive housing currently is. And if you’re in Canada, check out the Canadian stats as housing “boom/recession” is very different in nature than the US crisis. (and I say this as a Canadian living in the US)

What I can tell you overall is that much of Canada is still quite expensive. Even with recent drops in places like Edmonton / Calgary, the average home price is well out of reach of the average family. My personal rule of thumb is the “two-professional family”. If two late twenty-somethings with professional careers (engineer, nurse, teacher, etc.) cannot afford a house, then prices are way too expensive. If they can’t afford a home who can?

In Western Canada, that’s quite true. In fact, if you look at the previous PDF, the major Canadian city with the lowest multiple is Winnipeg (at 3.0). Regina and Saskatoon were both higher. Of course, if you start including property taxes, Winnipeg moves out of the “affordable” range. Average prop taxes are $3,600 / year which is double that of other Western cities. But Winnipeg has to pay for lots of snow removal and road work, just the way it is.

Anecdotally, I know lots of western Canadian 20-somethings who simply can’t afford a home.

So to your original question should we still wait before buying or is this a buyer’s market now.

Please take a look at the stats. In some places it may truly be a buyer’s market. And most places are suffering falling home prices so it may feel like a “buyer’s market every where”. But historically, it really isn’t. If you go over the charts, most of Canada is still above historic norms. It can feel low, but remember that we’re in a 15-year housing bubble. Most people just can’t remember what a house cost in 1993, nor can can they adequately adjust for 15 years of inflation.

Remember, it’s not like we have some type of “Canadian Space Shortage”. Winnipeg still has miles of gravel road inside its own perimeter. What we do have is an aging population that will likely want to “down-size” in the next 10 years and nowhere near enough people to fill up these old houses (here’s a population chart).

If you need a house now, they you need one now. But based on sheer numbers, I can’t believe that we’re anywhere near the rational bottom.

My advice to Jenny, rent for the next 2 years, by then it will be very clear how this economic mess is playing out, and you can make a more informed decision whether to buy a house at the bottom or continue renting. But we’re not at the bottom yet, we’re just now at the end of the beginning.

I am also in the lower mainland and can relate to your position. Even married with no kids and two full time jobs earning >$100K combined we are still renting. But I am completing my education as well and so it is not a good time to buy. Throw some kids in there and only one income will service the debt. Not a good idea with current prices if you still want to max RRSP and have a little bit in savings.

Good luck and keep saving for that down payment.

DAvid

I’m not always a fan of simple rules, but whenever I crunch the numbers, the theoretical rent vs. buy curve centers around this point.

If you look at both of your clauses, neither of these situations would solve Jenny’s problem of the home simply being too expensive.

Even outside of Jenny’s situation, legal fees, closing costs, etc. are just small portion of the equation. There are also moving costs and moving time. Inevitable repairs both to sell your old house and move into a new one. You have to blow a bunch of time packing boxes and bunch more time filing paperwork as you update your address in 20 different places.

And the clause on lost home value would be quite dicey because a house is worth what it actually sells for. How would such a clause even be enforced? If I bought at $225k and my neighbour’s sold for $200k the next day do I get the money? Do I have to sell for $210k to get the money? Why am I selling? Just b/c the house dropped in value? Am I selling b/c the company closed up shop? What are the odds they honor the promise?

Point is given the details on the clauses you gave it’s impossible to really provide a much of answer. Which is why I defer to my original quote from Scott. Unless you can find a way to make the mortgage less than the rent, it’s going to be tough to justify a financial decision to purchase a home. (if you just really want one, go ahead, no sympathies if it sucks :)

The best way is to compare both scenarios: renting and buying. One of them will end up with more saving, that will be the one for you should go for.

for example
expense for renting: 20k a year
expense for buying: 30k a year

it is clearly renting will make you 5k richer

If I was in your position, I would wait until after the olympics when *hopefully* prices will correct themselves. Until then I would save for a sizeable downpayment for either a duplex, or a readily convertible duplex.

If your income doesn’t increase, a duplpex is the only probable way to afford a “stand alone” house as banks/cmhc appraise income producing properties different than single family homes. Hence you may be better off.

I have several friends in Toronto who are single and makign 60k+ but are unable to afford a single family residence unless they rent out the basement.

What if the scenerio changed whereby there was no costs associated with buying and selling a house, ie: no legal fees, land transfer tax, or commissions.

As well, if the house actually lost value the employer would cover the costs up to $15K.

Would all of your answers still be the same? (Rent) Your Thoughts.

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I’m 24 and live with my girlfriend in Toronto. We have amassed a fair amount of savings (~35k, although a large chunk is reserved as emergency funds) and have a good income for new grads (80k combined).

In the end the interest we would pay + condo fees + utilities versus our current rent just doesn’t make sense. Ownership would probably cost us 700-800 more a month. We’re more than happy to keep our downpayment and bank, what we consider to be, considerably savings.

Renting also allows us to live in a convenient area (close to subway, groceries, etc. = no car) that is quite expensive to own in.

Renting and amassing a larger downpayment and possibly joining forces with a SO in the future is the best play, IMO.

Does anyone know of a stock and options trading brokerage account that can be used with TFSA savings account funds?

Take a look at the BILLIONS of people around the globe who live their entire lives without ever owning their residence, life long renters. They accept that and are fine with it and get on with their lives.

But somehow we Westerns, perhaps via our Heritage of Conquest (Manhattan for $5 worth of beads!) and mass availability of wide open spaces, are almost culturally hardwired to seek out “ownership”, even if it’s not the best option. We all want to be King or Queen of some kind of castle. It takes a lot to go against that grain.

It’s all kind of weird really, because 1) by Law of Nature, we are ALL renters of everything we “own”, and 2) by Law of Man, our stuff can be seized by the government, especially land (try NOT paying your land rent, I mean tax). So we never really own anything 100%.

Stick with the numbers. If it’s cheaper to rent than to pay even the lowest mortgage (and all the lovely accessory payments that accompany ownership), then keep renting until such time the ratio reverses.

So Jenny just keep saving and enjoy your twenties….buy when you hit thirty and have a nice chunk of change for a downpayment….

As others have stated, Home Ownership = Increased Risk.

I also want to note the Jenny and Chris Clarke that “owning a home in TO or Vancouver” is quite different from just “owning a home”. These two cities are “international caliber” cities and command a much higher price.

Here’s some data on median incomes: 200k in Winnipeg or Saskatoon gets a lot more house than 200k in TO or Vancouver, yet median salaries are almost identical. I don’t want to crush dreams, but buying a home in Vancouver is simply not for everyone.

If it’s any consolation, I live in Kansas City (median home price of 175k) as a recent export from Edmonton. I’m 28, make 75k / year, have more money in the bank and I still rent.

It’s not a credit thing (I could by a new car with my Credit Card), it’s a risk thing. I work in a volatile industry (IT). My next job could be anywhere. My wife is 24 and studying. Maybe the school she wants to attend isn’t in KC. Maybe we want to have kids and raise them near family, but be “vagabonds” until then.

Right now, buying a house simply carries a lot of risk. I’m not sure where I’ll be in 12 months let alone 12 years. And buying a house is like a 5 year sentence. There are almost no scenarios where buying and selling a house in a 5-year span is going to beat renting.

Just keep trucking, you’re doing the right thing.