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Mapping Affordability in the Epicenter of Canada’s Housing Bubble

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Mapping Affordability in the Epicenter of Canada's Housing Bubble

Mapping Affordability in the Epicenter of Canada’s Housing Bubble

At the epicenter of Canada’s housing bubble, which is now rated as the most overvalued in the world, is the west coast city of Vancouver. It’s there that low interest rates and foreign buying have fueled the average detached home price to a record of C$1.47 million, a 20% increase from the previous year.

While there are many measures of unaffordability, the government and federal agencies frequently use one such measure called the Shelter-cost to Income Ratio. It essentially compares the annual cost of an individual’s housing with the amount of income they have coming in each year. Federal agencies in Canada consider households that spend 30% or more of total before-tax household income on shelter expenses to have a “housing affordability” problem.

In Vancouver, however, the city has become so unaffordable that 25,000 households pay more for their shelter costs than their entire declared income. This works out to 9.5% of the households in the city – far higher than Greater Toronto (5.9%) or Montreal (5%).

We recently stumbled across a data mapping project by Jens von Bergmann, via the Hongcouver blog. Von Bergmann, who runs a data firm in Vancouver, has compiled a series of interactive maps that overlay census data onto the city. In Canada, the mandatory census happens every five years and creates a wealth of granular information.

Here’s the percent of people in each city block that pay more for housing than they take home in income:

Percentage paying more for housing in Vancouver, the center of Canada's Housing Bubble

In an example neighborhood pocket (dissemination area 59150581) located between Arbutus and Macdonald streets, 44.8% of households pay more for shelter than they bring in for income. The average value for each “shelter”? A cool C$1.98 million. Yet, the median individual income in the area is only C$19,993.

Things get stranger yet in Vancouver’s high-end Coal Harbour neighborhood, where somehow 62% of households claim to have lower income than shelter costs. In a pocket of Yaletown, 50% of people make less than the cost of their housing.

While the precision of the data is excellent, the only problem with it is that the last census in Canada took place in 2011. Four years ago, housing prices were a fraction of what they are today. Compare today’s price of a detached home (C$1.47 million) to the price in August 2011: C$888,243.

Have median wages jumped this much? Not likely – the problem is only getting worse.

Here’s how the value of land has changed by block from 2006 to 2014 according to some of von Bergmann’s other data based on City of Vancouver assessment records:

Vancouver change in land value

Despite the country entering a technical recession, consumers having record-high debt, and commodity markets getting routed, Vancouver’s market is still flying high today.

Housing sales in August 2015 were up 28% compared to the ten-year average, and the median price in Vancouver’s west side is entering “crazy” territory at C$2.87 million. While it is true that shelter in the epicenter of Canada’s housing bubble may seem quite expensive, at least the homes don’t look like crack shacks. Or do they?

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Real Estate

Charted: U.S. Median House Prices vs. Income

We chart the ever-widening gap between median incomes and the median price of houses in America, using data from the Federal Reserve from 1984 to 2022.

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A cropped chart with the ever-widening gap between median house prices vs. income in America, using data from the Federal Reserve from 1984 to 2022.

Houses in America Now Cost Six Times the Median Income

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

As of 2023, an American household hoping to buy a median-priced home, needs to make at least $100,000 a year. In some cities, they need to make nearly 3–4x that amount.

The median household income in the country is currently well below that $100,000 threshold. To look at the trends between median incomes and median house prices through the years, we charted their movement using the following datasets data from the Federal Reserve:

Importantly this graphic does not make allowances for actual household disposable income, nor how monthly mortgage payments change depending on the interest rates at the time. Finally, both datasets are in current U.S. dollars, meaning they are not adjusted for inflation.

Timeline: Median House Prices vs. Income in America

In 1984, the median annual income for an American household stood at $22,420, and the median house sales price for the first quarter of the year came in at $78,200. The house sales price-to-income ratio stood at 3.49.

By pure arithmetic, this is the most affordable houses have been in the U.S. since the Federal Reserve began tracking this data, as seen in the table below.

A hidden caveat of course, was inflation: running rampant towards the end of the 70s and the start of the 80s. While it fell significantly in the next five years, in 1984 the 30-year fixed rate was close to 14%, meaning a significant chunk of household income went to interest payments.

DateMedian House
Sales Price
Median Household
Income
Price-to-Income Ratio
1984-01-01$78,200$22,4203.49
1985-01-01$82,800$23,6203.51
1986-01-01$88,000$24,9003.53
1987-01-01$97,900$26,0603.76
1988-01-01$110,000$27,2304.04
1989-01-01$118,000$28,9104.08
1990-01-01$123,900$29,9404.14
1991-01-01$120,000$30,1303.98
1992-01-01$119,500$30,6403.90
1993-01-01$125,000$31,2404.00
1994-01-01$130,000$32,2604.03
1995-01-01$130,000$34,0803.81
1996-01-01$137,000$35,4903.86
1997-01-01$145,000$37,0103.92
1998-01-01$152,200$38,8903.91
1999-01-01$157,400$40,7003.87
2000-01-01$165,300$41,9903.94
2001-01-01$169,800$42,2304.02
2002-01-01$188,700$42,4104.45
2003-01-01$186,000$43,3204.29
2004-01-01$212,700$44,3304.80
2005-01-01$232,500$46,3305.02
2006-01-01$247,700$48,2005.14
2007-01-01$257,400$50,2305.12
2008-01-01$233,900$50,3004.65
2009-01-01$208,400$49,7804.19
2010-01-01$222,900$49,2804.52
2011-01-01$226,900$50,0504.53
2012-01-01$238,400$51,0204.67
2013-01-01$258,400$53,5904.82
2014-01-01$275,200$53,6605.13
2015-01-01$289,200$56,5205.12
2016-01-01$299,800$59,0405.08
2017-01-01$313,100$61,1405.12
2018-01-01$331,800$63,1805.25
2019-01-01$313,000$68,7004.56
2020-01-01$329,000$68,0104.84
2021-01-01$369,800$70,7805.22
2022-01-01$433,100$74,5805.81

Note: The median house sale price listed in this table and in the chart is from the first quarter of each year. As a result the ratio can vary between quarters of each year.

The mid-2000s witnessed an explosive surge in home prices, eventually culminating in a housing bubble and subsequent crash—an influential factor in the 2008 recession. Subprime mortgages played a pivotal role in this scenario, as they were issued to buyers with poor credit and then bundled into seemingly more attractive securities for financial institutions. However, these loans eventually faltered as economic circumstances changed.

In response to the recession and to stimulate economic demand, the Federal Reserve reduced interest rates, consequently lowering mortgage rates.

While this measure aimed to make homeownership more accessible, it also contributed to a significant increase in housing prices in the following years. Additionally, a new generation entering the home-buying market heightened demand. Simultaneously, a scarcity of new construction and a surge in investors and corporations converting housing units into rental properties led to a shortage in supply, exerting upward pressure on prices.

As a result, median house prices are now nearly 6x the median household income in America.

How Does Unaffordable Housing Affect the U.S. Economy?

When housing costs exceed a significant portion of household income, families are forced to cut back on other essential expenditures, dampening consumer spending. Given how expanding housing supply helped drive U.S. economic growth in the 20th century, the current constraints in the country are especially ironic.

Unaffordable housing also stifles mobility, as individuals may be reluctant to relocate for better job opportunities due to housing constraints. On the flip side, many cities are seeing severe labor shortages as many lower-wage workers simply cannot afford to live in the city. Both phenomena affect market efficiency and productivity growth.

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