You did it! Your household earns the median income in Canada and you convinced your boss to work from home. Now all you have to do is find an affordable home, in the second largest country in the world. Easier said than done. Don’t worry, we have you. We hope you like remote small towns or rural towns because that’s all you can afford.

About today’s numbers

Today we take a look at the cities you can afford to buy a home in using the CREA Composite Benchmark Price. We calculated the maximum mortgage for approximately the median household income ($100,000). We’ve also assumed you have a 20% down payment, either through savings or Mom and Dad’s Bank.

Households can use a smaller down payment if they get a high-ratio mortgage. However, the maximum you can afford usually decreases since you have to fund the rest. High-ratio insured mortgages usually make sense when you have a lot of income and not a lot of savings. If your earnings are already stretched to the limit, increasing the margin only helps wealthy buyers.

Two quick notes on payments and household income. People who use loan calculators often fail to enter property taxes or heat/energy. When they go to a mortgage agent, they wonder why they are not as eligible as they have been on the Internet? Don’t be those people.

We have used an industry standard for these numbers since we are only making a rough guideline. When you do this, you may see a higher or lower number, depending on the spend. Buying a condo means maintenance costs, which further reduce your maximum loan. If you’re buying right now, run the actual numbers with a mortgage agent.

Second, let’s talk about household income. Depending on those around you, you may not really know what “normal” income is. Some people I meet don’t understand how someone makes less than $100,000. Others think incomes of $100,000 are unattainable unless you are among the elite.

We used $100,000 for income because it’s a round number that’s also close to the median household. Even with “rising” incomes due to job vacancies and inflation, Canada hasn’t experienced a jump like the United States. The average salary for labor requiring at least one technical skill is $54,100/year. Dual-income households with skilled labor would earn an average of about $108,000/year in total income. They are just above the median we used.

It is also generous to assume that both members of a household are also skilled workers. Some pretentious people might think, well – if you’re a general worker, you should work harder. These people often don’t realize that most of the value in high-growth cities is created by low-income people. Cafes, restaurants, art galleries – everywhere with a role vis-à-vis the public. These are people who are at the bottom of the pay scale, and that’s also a big part of why expensive cities are expensive in the first place.

Anyone who thinks big cities like Toronto have higher than usual incomes is wrong. Despite what many assume, incomes are lower and housing costs are higher. So we stick with $100,000/year for the calculations.

Now let’s get to the numbers!

A typical Canadian household cannot afford 69% of the markets. nice

What could you, an ordinary household earning the median income, afford in 2022? Not a lot. A benchmark home in 69% of the CREA Home Price Index (HPI) markets is now out of reach. Even Calgary just got away from you. Sorry Toronto Millennials, we know that was your exit plan.

Households earning $100,000 in annual income can qualify to purchase a home for around $497,900. Again, this assumes they have the 20% down payment ready, or around $100,000. That was the good news.

What real estate markets can a typical household afford in Canada?

The price of a benchmark house (i.e. a “typical” house) across Canada and the maximum budget a household earning $100,000 would qualify for, assuming they have a down payment by 20%.

Source: CREA; Live better.

The bad news is that you can barely afford to live in a city like Sudbury (where a benchmark home costs $481,700) in April. Last month, cities that came in just under your maximum budget included North Bay ($461,300) and Nova Scotia ($414,100). It’s Nova Scotia, not Halifax ($528,100). A quick browse around the province and it’s hard to find a place with high speed internet at your price.

Want to buy in Toronto, Vancouver or even Hamilton? Uh…

Have you dreamed of living in cities like Toronto or Vancouver… or even Hamilton? Good luck, because you’ll be really hard pressed to find anything within your budget. Home prices in Greater Vancouver now require a minimum annual income of $267,000 for a benchmark home. In the GTA, you can get away with a more modest household income of $263,300. In Hamilton, the most overvalued city in Canada according to the IMF, a household must earn $216,600 a year. Hamilton is nice, but you’re pretty close to average income in Monaco…and there’s no income tax in Monaco.

Canada is manufacturing a housing crisis, despite expert warnings

No, Canada has not always been in such a wild situation. Housing affordability has been stretched ahead of 2020 in major cities like Toronto and Vancouver. It wasn’t until 2020 that prices started to inflate across the country, even in rural towns. Working from home has contributed to the disconnect, but the bigger issue is monetary policy.

The Bank for International Settlements (BIS), a central bank for central banks, recently issued a warning about this. A newsletter for its members shows that house prices have soared around the world. This was a conclusion also repeated by Canadian banks weeks before. The local industry could be convinced that all countries with a similar monetary policy ran out of land at the same time. However, the BRI is not sold on this narrative. Instead, the researchers conclude that similar monetary policy reactions created the same environment. Easy money is responsible for “most” of the gains made by the markets.

They weren’t just explaining how spectacularly we messed up, but they were providing a solution. By raising rates and reducing leverage, they see monetary policy cutting gains in an orderly fashion. Higher rates and lower leverage are the solution to a problem created by low rates and high leverage. What a new concept.

Canada, world renowned for its affordable housing, is going the other way. He has a number of plans to stimulate demand and increase leverage, thereby maximizing credit growth. The Bank of Canada (BoC) has warned that it may not raise rates as high as it should to accommodate housing debt. At the same time, the federal government plans to roll out demand stimulation and increase leverage. It’s almost as if they are consciously executing a plan to raise house prices.

Can an economy maintain such high house prices while retaining its youthfulness? We are about to find out. In the meantime, people in a hurry to buy a home — enjoy Sudbury.

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