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Rich Dad? Poor Dad? A New Territory for Calgary House Price to Household Income Ratios January 19, 2008

Posted by DustinRJay in house price to household income.
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I was interested in how Calgary house prices historically compared against household income.  The two papers I am aware of that have been written in relation to the subject are:

  1. RBC’s “Housing Affordability” concluded that “Affordability levels in Calgary are now comparable to levels reached in the late 1980’s at the peak of the housing market bubble and this has sparked some concern about the sustainability of prices… But caution is now warranted because we anticipate a significant slowdown in the pace of resale activity, new home construction and price gains in the coming year.  Many properties have likely overshot their true value and will return to a pace of growth closer in line to the fundamentals.”
  2. Another source of research on the relationship between house prices and household income is the 3rd Annual Demographia International Housing Affordability Survey: 2007.  In it, the survey states that, “In recent decades, the Median Multiple has been remarkably similar among the nations surveyed, with median house prices generally being 3.0 or less times median household incomes where demand and supply are balanced.”

For Calgary, the median house price to household income ratio has been 2.8 as shown in the graph below:

 Rich Dad? Poor Dad? A new territory for Calgary house price to household income ratios

In general, when house prices deviate too much above or below the longterm house price to household income ratio, house prices have tended to correct. Therefore, caution may be warranted if buying, as house prices are about 75% above what people could traditionally afford.