Thursday, November 25, 2010

Median house price multiples in Toronto, Montreal and Vancouver

These are very interesting statistics just sent to me from my friend Ben.

According to Demographia, the Median Multiple has been remarkably similar among the nations surveyed, with median house prices being generally 3.0 or less times median household incomes.

In late 2009, Calgary and Montreal were rated "seriously unaffordable", scoring 4.6 and 4.9 respectively.

Toronto made it to the "severely unaffordable" hall of fame with a score of 5.2.

Vancouver ranked the most unaffordable city amongst the 272 markets surveyed with a price-to-income ratio of 9.3 (Exhibit 4.1).

And the price of a home relative to rental income in Canada is amongst the highest in the developed world.

Not good.

In 2006, Fed chairman Ben Bernanke testified in front of Congress that he didn't think housing prices were overpriced.

He doubted that home prices would fall much since home prices had not fallen for 60 years.

As we now know, that reasoning was an enormous logical fallacy.

--"Toro", "Canadian Housing Bubble",, August 29, 2010.

Hi Ben,

Very interesting statistics. Yes, the ratio of income to house price is often a measure of how over inflated the prices can be and as you have pointed out, our ratio's are very high. Many say that this is sustainable because of low interest rates, but if the rates increase dramatically, look out! I believe we will have low rates for at least another 5 to maybe 10 years, this is the only way the economy will not fall in upon itself.

Bernanke's remarks that house prices will not fall because they have not fallen in 60 years is really absurd!

Thanks for the great stats!

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