The report notes that residents in the capital should be making $129,320 per year – as of February, 2024 – to qualify for a mortgage to purchase the average priced home. The income needed to prequalify has risen by $480 from January to February.
The average price of a home in Ottawa was $621,600 in January and $628,500 in February – an increase of $6,900, reads the report.
Every single time.
Average home price aligns with being in the top 10% or so of income, because the entire renting market exists, as well as the entire “living at home” market (or lack thereof)
Average income should align with around the 10% to 15% mark of home prices.
People like to forget that the entire renters market exists, consuming up a very large chunk of earners who aren’t actually interested in buying a home atm for various reasons.
And not “I can’t afford it” but genuine “I don’t want to settle down in 1 place yet” reasons. IE if their job requires moving, or if they don’t even plan to live long term at the same location, etc. Keep in mind that the entire demographic of earners includes teenagers living at home working part time while in high school, a huge chunk of the market isn’t even close to affording even the bottom 1% of homes, they can’t even afford to rent because they aren’t at that stage of life yet.
Everytime you see an article talk about the average or median home price, remember that it should line up with around the top 10% or so of earners.
So, then you ask yourself, does someone in the top 10% earning around 129k a year sound close to the mark?
It’s a smidge high still, but not that far off.
I agree that average/median/benchmark home price reports aren’t very revealing. Individual income vs family income is also a confounding factor.
I disagree with your assertion that only 10% of wage earners ought to qualify for mortgages large enough for home ownership. (Not house ownership, home ownership).
I would even like there to be something within the price range of a person working part time.
That wasn’t my assertion.
The top 10% of earners align with the top 50% of homes.
Its a curve though, so yes, there are very much homes for people below that.
Keep in mind the curve of earners starts at literally making zero dollars a year, and scales up to Jeff bezos.
So it’s reasonable that the bottom chunk that aren’t earning much, if anything, at all can’t afford a home.
I would expect in a functional economy a person working full time min wage can rent about 300 Sq ft of private living space or so.
That should be the starting point of the renting line, which already puts you above the bottom 10% to 20% of earners that are making less than that (part time work, or not working at all)
I think it’s unreasonable to expect someone working part time to earn enough for a home on their own. That is 100% “you need a roommate or two” territory imo.
The cheapest homes to own should align with a step below average earner.
So if the average earner is making 70k, I’d expect the cheapest/lowest bid homes to be affordable for around 55k to 60k or so a year combined income.
These homes should be in the “40 minute commute” or “fixer upper” territory, or its very small, where it’s got a downside but it’s a home to call your own.
The average home is going to be easily double to triple the cost of bottom tier of homes, because that’s how the math just works and normal to expect in a bell curve.
Yeah my bad.
Why? Why not strive for a society where any person that works can afford to buy a home.
Why? Why can’t people of marginal means own something? Why do they have to pay rent to the land owning class?
It’s been a while since I lived in Ottawa so I did some research which basically confirmed that you’re describing things as they are.
The least expensive structure that’s potentially inhabitable, and is within the boundaries of what realtor.ca considers Ottawa is about $200,000. It’s a 40 minute drive from Parliament Hill. It’s beyond what most people would call a fixer upper though.
The problem I’m complaining about is that the bell curve of available homes is truncated at $200,000, and it doesn’t need to be. Whereas earning bottoms out at $0 (Obviously).
Because the cost to build a home undeniably requires over a dozen skilled labororers in a semi dangerous industry to work full time to assemble, as well as the countless hours of dangerous skilled labor work that was needed to refine abd produced the materials.
To assert a kid working part time at a lower skilled non-dangerous job part time is worth an amount enough to match that cost to the degree they can pay it off in 25 years is just not reasonable.
Skilled dangerous labor cuts many years off the workers lives, and that’s with safe practices. It’s back breaking work and just fundamentally costly in body and mind.
I’ve worked both types of work plenty and the difference us night and day, I have no issue with such labor costing so much more.
It’s just plain economics, you either need to invent a way to build homes for like 1/10th the labor costs (of you figure out how you’ll be a millionaire real fast), or convince skilled tradesfolk that spent half their lives honing their skills they deserve minimum wage, or convince fast food resteraunts they should pay an untrained brand new first job 16 year old 30 bucks an hour.
I wish you the best of luck on any of those endeavors.
Because they want to and it’s genuinely better.
Owning property is an enormous risk. Once you buy a home it’s orders of magnitude to change location. You have to put down deep roots and commit, abd it’s a gamble you don’t find major issues that suddenly sink you 100k in the hole.
Renting is low risk and much less of a commitment. If you are renting it’s much easier to uproot your whole life for a job opportunity or change in location. That’s often a good thing. You don’t need to go through the massively difficult and complicated process if selling a home.
There’s a huge portion of wage earning adults the don’t want to be locked down yet, they want to have the ability to chase a change or opportunity at the drop of a dime.
Most people heavily romanticize home ownership.
In reality, it’s nice, but it’s also a giant money pit you just keep dumping cash into with little payback. It’s just as much a money pit as renting is.
It’s not profitable to own a home, it costs about as much money as renting. And I’m not just talking about the mortgage, I’m talking about the money it costs to keep the place intact and the furnace going.
It goes lower but you move away from detached homes.
There’s often trailer park homes that can go lower than that. You often are paying for the home but not the land it sits on, so it can go as low as 60k to 80k even, or even way lower for older homes, but the downside is you lose some owner rights (you often can’t modify the land itself without approval etc etc, you are at the whims of the land owner your property sits on)
There’s also a push for even smaller affordable homes, which is gaining traction, but has the downside of bring very small (but that can fit some people’s lifestyles)
And finally you have small condos which can be cheaper but also have the downside of, well, being a condo.
It was careless of me to imply that I meant part time minimum wage earners. I meant part time workers that make low wages.
If a landlord can make profit from tenanting a home, then the tenant can afford to own that home.
Prefabricated homes.
Am I misinformed? I was under the impression that many people want to own homes but can’t afford anything.
I agree, renting should exist.
No it doesn’t. $200,000 was the lowest listing price for any potentially inhabitable home on realtor.ca within the territory it considers Ottawa.
I didn’t say even part time workers ought to be able to afford a house ownership. I said home. My (albeit: quick) search found no homes for sale within Ottawa for less than $200,000.
That’s a choice our society is making.
My wife and I own a house, and I agree that house ownership is expensive. Home ownership is less expensive than renting (granted riskier).
No. My house has increased in [estimated] value by more than the total pre-tax salary I had at the time of purchase. Every year. Granted, I make much less money than my wife, we bought pre-2020 and there’s a lot of time left on our mortgage so we’ll see what the market does. All that appreciation is tax free too.
Yes, a way to allow people with marginal income the potential of ownership. That’s what I’m talking about. We agree.
This is still incredibly low below the mark of fundamentally how much a home costs to manufacture.
Landlords, long term, tend to not make as much money as people think. Most well of Landlords have gotten there via potentially illegal or problematic means. They also primarily rent apartment complexes. Most landlords avoid renting detached homes as it’s a money sink.
You always have to keep in mind a very sizeable chunk of people that are included in “average earner” calculations (and thus impact the bell curve) are very young folks who haven’t even started a career yet. They are potentially living at home, or renting, abd going to school.
A very sizeable chunk of folks 100% don’t want to own property yet, their career/life trajectory is still too volatile for them to want to put down roots somewhere specific when they may want to change entire cities to pursue goals at any time.
Tonnes of folks would much rather go backpacking in Europe for a year, or move to another city to live with their partner.
And keep in mind a chunk of earners are literally still in high-school and very much not ready for so.ething as complex as a mortgage, they can’t even vote or drink yet and maybe just git their drivers.
These people 100% are on the Earners graph though, and they influence that “Average Earner” value.
So keep in mind the “average earner” factors in kids working part time at high school, and there’s a lot of em out there.
That’s why simply speaking your absolute bottom of the home owner demographic starts a decent ways up the graph. The first chunk if the graph is “used up” by all those folks who literally don’t even want to own a home yet.
I’ve seen numbers thrown around of around 25% to 30% or so of the bottom of the graph being this demographic. Most people in late teens to early 20s aren’t remotely interested in a home, and a sizeable amount of late 20s too. It isn’t until you hit people in their 30s that prospective home owners start to become the majority rather than minority.
It’s irrelevant whether landlords make only small profits, because a small profit is still incompatible with your claim that it’s impossible to build housing that low earners can afford to own. Because if low earners can afford to rent units in apartment complexes then they can afford to own those units. But our society does not make such units available to them for purchase. Can you please engage with this obvious inconsistency in your position?
You skipped it when you quoted what I said but left out the important bit.
Furthermore, renting is profitable because you are paying for a service and all the benefits I prior mentioned.
Effectively speaking renting anything, not just homes, works this way.
Why do people rent extremely expensive tools from home depot instead of just buy them themselves?
Because they don’t need those tools for life.
Why do people rent apartments, even though it’s “at a loss” and it’d be more economical to own?
Because they don’t want to own some shitty apartment that’s half ass built (most are, even “nice” ones)
Renting leverages the risk of cost onto the person renting the item out. I know if I buy a $10,000 tool and rent it out, it’s a gamble that it will pay for itself in renting returns before it shits the bed.
Apartments are much the same. You have 2 routes to go.
Maintain it right, but then your returns are extremely tight and if anything goes wrong early on you are fucked, and deep in the red. You likely won’t make your investment back for 20+ years, but after that it’s good money bit you have to be extremely confident that you can take care of the place right
Cheap out and make fast cash up front and do bare minimum maintenance, trying to make your investment back before the property goes belly up.
If you rent, you have no risk. You pay money abd live in a home.
If you truly are under the impression that landlords are universally making profits, you are deeply mistaken.
You hear about the small handful that make good money and typically it comes out that they were of the variety #2, short term profit but they’ll pay for it later when their property tanks in ~20 years due to bad maintenance, and their cash flow dries up and suddenly their money in starts turning into money out.
Basically, you need to look at a lot of the shitty landlords as idiots who are pretending they are rich but are buying everything on credit cards.
Yeah, sure, thay are buying nice stuff now, but it’s with borrowed money
Except instead of a credit card it’s a mortgage, any their renters are effectively a mechanism they can use to convert their mortgage into cash, at the cost of building wear and tear.
But the wear and tear is delayed, really delayed. Instead of having to pay off the credit card in 1 month it’s more like if you have to pay it off in 5? 10? 20 years time. It’s a random dice roll.
(Paying off the proverbial credit card being building maint)
You can suddenly have 200k evaporate overnight because something shit the bed because you didnt deal with it 2 years ago, or 4 years ago, because you cheated out on something else 8 years ago.
Each of those shortcuts was what meant “profits” early on, and thus they looked profitable…
But now those profits come back to bite you.
Often it’s a case of “you saved 50k 8 years ago UT now you gotta pay 200k on repairs today, because you cut a corner”
I hope that above example greatly highlights how it’s like an idiot pretending getting a credit card from the bank = being rich and maxing it out asap.
Meanwhile landlords that do the job right early on are deep in the red for a lonnnnng time, and they don’t turn any profit til many many years later.
And when you look at the profits over 40 years of work to maintain the place… it’s basically just them turning a profit on their labor at a decent cost…
Because that’s literally what they did, skilled labor maintaining the place for 40 years. Which us reasonable to expect to profit off of.