"For many, condos remain the only viable option to tap into the housing market as condo ownership costs require just 35.4% of local median household income compared to a whopping 73.5% required for a two-storey home." (RBC)Their numbers are based on Vancouver prices, but our's here in Victoria are close enough to just bring them over.
"The final quarter of 2006, however, delivered some much needed affordability relief as a rising supply of homes on the market overpowered an already cooling pace of resale activity. The improvements were reported for the two-storey and detached bungalow segment, while condos and townhomes continued a fifth straight quarter of deteriorating affordability." (RBC)So what does RBC say about income, average price, and affordability? Let's start with the price. RBC says that an average condo price is $273,313 for Q4 2006. What kind of income did RBC say you needed to get that mortgage? $60,444/year. And given the price, based on the percentage of your income, your mortgage would have consumed only 35.4% or fully 1/3rd.
So what does MLS have as the average price in Victoria for last year? The 6-month average for the last half of 2006 was $286,881. That's a difference of $13,568.
I could stop here, but I won't, because I think the RBC report is misleading us. Completely. The relationship between their numbers becomes more sketchy when you factor in their criteria for qualifying for a mortgage based on these numbers: 25% down and the remainder is amortized over 25 years. Or, if we use the MLS numbers, you would need to have $71,500 as a down payment to get your monthly mortgage payment down so that it only eats up 35% of your available resources. Know anyone who is able to save up 1.2 x gross earnings for a down payment while also saving for retirement, when the actual costs of your new home shouldn't exceed 3 x gross earnings when they refer to their own fundamentals.
"'Purchasers simply refuse to be priced out of the market, even though household income has not kept pace with housing appreciation,' Elton Ash, Re/Max's western vice-president said in a news release." (SUN)Ah, the Sun. In an effort to create a balanced story, the Sun quotes from the RBC report and then backs up their findings with Re/Max experts:
"Vancouver first-time homebuyers continue to raid RRSPs, borrow money from family and take on mortgages that will take longer to pay off to get into the property market, the Re/Max real estate company reported today."Apparently Victoria's first-time buyers do as well. Except they do it a little bit more than their peers in Vancouver. So what I want to know now is who is a first-time buyer? I like to think we are. We're youngish, early 30s, haven't owned before, make an above-average income, carry a bit of student debt, have a bit to put down, but certainly not close to 25%. So we're really not first-time buyers because we can't/won't buy in this market with these numbers.
My guess for the 'real' first-time buyer? No idea, but they have to be ignoring the fundamentals. And so does the bank, because if the average first time buyer is "borrowing money from family" doesn't that hurt their ability to cover the mortgage? No problem if your the bank though right? They have 25% equity into the place day of purchase, the family will be the first people to not get their money when finances become tight because there's less consequences to the debtor's credit there.
Your thoughts? Tomorrow we'll bring houses into the discussion.
UPDATE: thanks to Roger for this great find in the TC business section:
"Today is the grand opening of the VREB Barber Shop in Victoria BC. Will Shaveit, owner and hairstylist, welcomes all home sellers in the region to his new enterprise. A few customers arrived on opening day and were given a light trim haircut. Customers do not need an appointment but business is expected to pickup shortly.
Will gave the following statement to the press: "We saw an excellent opportunity in the Victoria region and look forward to serving many of you in the near future. Several new barbers will be joining us over the next few months and a brushcut specialist will be joining us later this summer."