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Average home price 141% higher than median-earning family can afford

A recent report from RATESDOTCA has revealed a stark reality for Canadian households: the average home price in the country is a whopping 141 percent higher than what a family earning the median income can comfortably afford.

The report, published on Thursday, analyzed data on home prices and median earnings for Canadian households. It found that a Canadian family with a median household income of $79,876 can reasonably afford a home valued at $315,000, with a maximum insured mortgage of $299,500. However, the current average home price in Canada stands at $757,600, considerably exceeding the reach of the average household.

The affordability crisis is even more pronounced in major cities like Toronto and Vancouver, where average home values have skyrocketed to over $1 million. In these urban centers, mortgage insurers won't insure homes above this threshold, leading to increased interest rates and the need for larger down payments.

The report disclosed that, considering uninsured mortgage amounts, the affordability gap is extreme in these cities. In Toronto, average home prices are 162 percent higher than what a median-earning family can afford, while in Vancouver, prices are a staggering 195 percent beyond their reach.

The report included commentary from several economists affiliated with the Canadian Mortgage and Housing Corporation (CMHC). Aled ab Iorwerth, deputy chief economist at CMHC, pointed out that factors like population growth, increased income, and low interest rates have attracted many professionals to major cities like Toronto and Vancouver. However, the cities have been slow in increasing their housing supply to meet the growing demand.

In Alberta, while home prices in major urban centers are more affordable compared to Toronto and Vancouver, RATESDOTCA noted that a Calgary family earning the median income would still need 43 times their income to afford an average home in the city. The report attributed this to a rise in the cost of housing due to increased migration and Calgary's emerging reputation as a high-tech hub.

Edmonton, on the other hand, is the only major Canadian city where a median-earning family can afford the price of an average home. Taylor Pardy, a CMHC economist, explained that new construction in Edmonton has been more responsive to changes in demand, and slowing economic activity has put downward pressure on prices.

On the east coast, housing prices vary, with Halifax, Nova Scotia, having among the highest home values in the country. The average home price in Halifax is 83 percent higher than what an average household can afford. The report cited supply chain imbalances, population growth, and factors like construction costs, land prices, land-use regulations, and interest rates as reasons for the rise in home and rental prices in the city.

In Saint John, New Brunswick, and St. John's, Newfoundland and Labrador, prices are more manageable, but still seven percent higher than what an average household can afford.

In conclusion, the report's findings underscore the growing issue of housing affordability in Canada, with even median-earning families struggling to purchase homes in many regions. The report's experts emphasize the need for a collaborative approach from both the public and private sectors to address the housing affordability crisis. They also highlight the challenges posed by higher interest rates and the necessity of increasing the supply of homes in Canada to make housing more accessible to its residents.

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