Mind the Housing Gap

By | 10/04/2011

There is a growing gap in the affordability of homes between the US and Canada. An average home in Canada costs $360,000 which is more than twice the price of a median home in the US. Take a look below. The red line shows the average price of a home in Canada, and the blue line shows the median price of a home in the US.

Do these trends look sustainable to anyone? While it isn’t fair to directly compare an average against a median, the directions of these lines alone are quite interesting.  I think one of the reasons for the current gap is because it’s easier to get a mortgage in Canada than in the US.

Some people say Canada’s housing market is in a bubble but I don’t know about that. I believe in the fundamental workings of supply and demand. We don’t have empty apartments and office buildings in Vancouver.  We have a robust rental market with a vacancy rate less than 3%. And more people want to move into the city every year so the demand comes from real people who need roofs over their heads, not speculators. We might see a 10% correction when interest rates start rising at some point but nothing like a real crash.

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