First, lay-offs are occurring, salary freezes are in place at most major corporations, and salary reductions are occurring. I think it is safe to say that a 0% hourly wage increase is likely from 2008 to 2009 – maybe even a small percent decrease.
Second, todays interest rate really doesn’t give an indication of “affordability”. It will surely not stay this low for the long term. I am curious to see how your graph would look with 2008 wages frozen and an average interest rate – maybe 30 year average, but a 10 year should also do the trick – you could even do a 3 year running average. This will give a better indication of “affordability”.

Since 1976, one earner married families real income has increased by ~25% whereas all family units real income has increased 21%. This indicates to me that housing relative affordability for single earner families is roughly equivalent to the trends on the above chart for average household affordability.

I think in a low interest rate environment where safe assets have lower yields it can make sense to reduce the % downpayment. I could see it being a good policy to reduce downpayment requirements to some multiple of rent (maybe 2 times annual rent equivalent) so that there are not huge economic barriers for families to own.

Is there a stat indicating how many people are working within a family? I would guess there are more two income families now than in the early 80s.

Also saving for a similar % downpayment is more difficult today, with low interest rates and high house prices.

However, It is clear that the 20% interest rates had the biggst impact on affordibility in the last boom.

2006 $77,800
2007 $82,468 6.0% hourly rate increase
2008 $87,169 5.7% hourly rate increase
2009 $91,789 5.3% hourly rate increase

This analysis was done primarily as a relative metric to determine the potential for household liquidity problems as well as determine barriers to first time home buyers.

The last couple data points improvement in affordability is primarily due to interest rates dropping 1.2% since December 2008. I believe the early 80’s spike in poor affordability conditions is MUCH worse than current conditions.

The bubble blog is a good narrative, it really drives home the point of why everyone should have a capital cushion. For the most part, I think engineers grow up with a degree of skepticism about everything (probably greater than average Joe). This is driven by working in industries that are very cyclical, as oil and gas industry has had it’s ups and downs over the last century, and experienced first hand the effect of the deteriorating technology industry after the tech industry slowed down after 2001. I grew up on a farm, so have seen the effects of drought, bug infestations, and market prices can have on your business. The story is similar to the Ant and Grasshopper from Aesop’s fables. I’m not sure if the point of her story was that the bubble blog believes I am naive, or an excessive risk-taker. In any case, I think I have done a greater than adequate research on the market and personal budget and came in with a conservative viewpoint on the economy with a possible US recession in late 2007, and possible Canadian recession in early 2008, since September 2008 obviously deteriorated worse than expected. But since last year, on a personal level, have experienced strong growth in our household balance sheet due to a variety of reasons that leaves us in a better than expected position to handle the worse than expected recession. I am glad however if the example Alberta bubble blog illustrates encourages people to take a defensive approach to examining their future balance sheets if they are potentially looking at buying, as this would help to support long term economic growth.

Looks like you have become popular on the Alberta Bubble blog! Congratulations!

Can you list out the data you use? What interest rate? Which amortization and how much down?

The last couple of data points in the chart where affordability improves, I am assuming is mostly due to interest rates. Could you list the most recent values for income, house price and interest rate?

I am asking because I am suprised how the early 80s spike dwarfs the recent bubble.