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Affordability Survey - Housing

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January 21, 2008 – Comments (5)

Demographia just update their housing affordability survey.  I leave it for you to check out your area on your own.

Vancouver market that I just sold out of is median housing to median income unaffordable 8.4.  I estimate it was around 4ish when I first got into the housing market and it simply left you severely house restricted in spending choices.  I believe last year's report had it at 7.7.

The US has declined a wee bit.  The average last year was 3.7 for affordability and now it is 3.6. 

Page 18 says that in LA in 2000 29% of median income was required to pay median mortgage and now it is 82%.  Vancouver has gone from 41% to 71%.  I know Vancouver's market, there was a price dip around 2000, my home I bought in 1995 was worth about 10% less.

Ouch, out of 227 communities, vancouver was the 213th least afforable. 

On another note, tomorrow's open should be brutal.  I think the Nikkei has lost about 1100-1200 points between the last two days.  Canadian markets were hard it today. 

I just read from a world perspective there has been something like $5 trillion wiped out this year, and that is going to hit pensions bit time. 

I have said that I believe "they" can only afford about half of what they have promised in pension, and whether people realise it or not, this is probably true for all of us.

I am for the first time in my life grateful that places I worked until my late 30s did not have pensions.  When I consider my decisions for how aggressively I worked on debt, well, it was partly driven by the need to be out of debt and to be able to save for retirement, not save to supplement retirement.

Many people's easy spending a loose savings standards is driven by a belief they will be looked after in retirement by their pension.  Pension funds that looked like they were just getting back on track aren't "on track" any more.  There will be no choice but to lower payouts. 

5 Comments – Post Your Own

#1) On January 21, 2008 at 11:16 PM, floridabuilder2 (99.33) wrote:

it will be interesting to see how resource rich Canada will fare in this downturn...  the amount of wealth being lost in homes is nothing compared to the amount of wealth that has been wiped out in the last 3 months in the world stock exchanges and what will be wiped out...

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#2) On January 21, 2008 at 11:46 PM, dwot (39.30) wrote:

It will be.  A big difference between Canada and the US is that we are going into this with a surplus federal budget.  We also have more savings and more equity in our homes.

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#3) On January 22, 2008 at 1:56 AM, DemonDoug (34.04) wrote:

It means Canada is likely to weather things better, but vancouver is still toast.  BTW there's plenty of americans that own their homes outright (estimates at 40% of all homes), so that's plenty of equity.  And anything bought in the canada RE bubble is about to be destroyed too.

Florida, as far as wealth in homes, the difference is that a lot of people from all socioecnomic backgrounds have a lot of their wealth tied up in homes, whereas the stock market tends to be the upper classes.  In my view of a "healthy" economy, I tend to think the exact opposite as the reagan supply-siders - my belief is that if you raise up the poorest parts of your populace, everyone benefits and becomes more wealthy, but the uber super rich people don't keep gaining gazillions on the backs of those lower classes.  They grow, for sure, but not as unequally as it has been under Bush and his crony regime.

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#4) On January 22, 2008 at 2:12 AM, saunafool (98.67) wrote:

First, I bet Florida is pretty happy with his near 100% cash position this week. Blue light special time pretty soon. It's happening a little faster than I expected, but I suppose I should start scraping together my nickels for some buys.

Housing has a long way to go on the downside in some of those cities. I lived in "bulletproof" San Francisco until 6 months ago. There were people with half my income paying double what I would feel comfortable with. It wall all based on mortgages that they will never be able to repay. Housing prices are going to fall for a long time.

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#5) On January 22, 2008 at 9:06 AM, dwot (39.30) wrote:

DemonDoug, a good thing about Vancouver is that we have a lot more people who have been kept out of the market by stronger lending laws.  The people who bought my home had 40% down.  Far fewer will walk, and our insurance is better for the low down payment loans.  You had to pay 2.5% of the purchase price.  I think that is about 5x the price American mortgages were insured at. 

I doubt Canada and Vancouver will be facing the insolvency problems the US is facing and that is an enormous difference.  The rise in the US dollar is demonstrating people have not considered what that difference means.  

I think you are right about the so called "supply side" economics.  Supply side economics is steal from your children and grandchildren economics.  And this most recent theft makes me wonder is even the great grand childen have been stolen from.  I completely agree about the poorest part of your populace.  That is essentially how American created their middle class.

Saunafool, I am equally happy with my 100% cash position...  I agree on the housing having a long way to go on the downside.  I just know how hard the Vancouver housing market has been for my entire home ownership life and it just always seemed to me that given that we had household income almost twice the median for a while there that we should have been stimulating the economy but instead we were sharing a vehicle and constantly looking for how to cut costs.  If the so called "haves" struggle like that what the heck are the rest doing?  

I also talked to lots of people from all different "walks of life" about our local economy over the years and for example I remember a woman probably 10 years older than me, just high school educated, but did the "right" things and got herself a 2-bedroom apartment before Expo 86, which tripled our housing market over the next 7 years.  Anyway, she said she always had do problems paying her bills, but the last 5 years each year had become more challenging.  It has been 5 years since that conversation and I bet she has become completely house poor.  I wonder if someone in her place would just hold the line as the mortgage would be paid off soon, or if she extended her mortgage to reduce payments, or rented out her spare bedroom.

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