Saskatoon housing affordability sees first signs of erosion in three years: Demographia

You probably don’t need an international study to confirm that housing is expensive in most major metropolitan areas of Canada. Saskatoon is no exception.

“Affordability” is a slightly more complicated beast. There are a number of ways that one can examine affordability. One of those methods compares the median* income for an area against the median home price. Demographia, an organization that tracks changes to affordability uses what they call “median multiples.” The median multiple is derived by dividing the median income into the median price. As seen on the following chart, Canadians can expect to pay roughly 3.6 times the median income for a home priced at the median. So, even if prices are rising affordability can improve if incomes are rising at a faster pace.

Clear enough? Good!

After three successive years of slightly improved affordability, Saskatoon slipped back into the ranks of what Demographia considers “seriously unaffordable” as the median multiple for the area increased from 4 to 4.3, its highest point since 2008 when it had reached 4.6.

Regina showed the largest erosion moving from 3.3 to 3.8 but still managed to maintain a “moderately unaffordable” rating from Demographia.

The picture improved somewhat in Vancouver, which holds the distinction of being the second most unaffordable market in the world, as the median multiple falls from 10.6 to 9.5 over the course of the year.

See the entire Demographia survey for 2013 and past reports for 2012, 2011, 2010, 2009,2008, 2007, and 2006.

*The median defines the centre point where half of all values are above and half are below that point. For instance, if the median income for an area were $50,000 then half off all income earners would earn more than that and half would earn less. In the case of home values, it’s the point at which half of all sales occur above the number, and half occur below.

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Norm Fisher
Royal LePage Saskatoon Real Estate

 

Comments

  1. An interesting response to the recent Demographia study from Alan Thomarat, president and CEO of the Canadian Home Builders’ Association – Saskatchewan and the Saskatoon & Region Home Builders Association, appeared in today’s Star Phoenix.

    http://www.thestarphoenix.com/homes/story.html?id=7942066

  2. I’m never really able to understand this report either. The study used a lower median income for Saskatoon in 2012 than they did in 2011.I was under the impression that incomes had risen. Further, the median house price that they quote for our area is well below what it actually is so I question the accuracy. I think the sales numbers speak to whether or not people can “afford” to buy homes. 2012 saw the second highest sales levels ever in Saskatoon.

  3. I contest the methodology of this study. How can you consider gross incomes without considering tax rates?

    Obviously take home pay is the only thing that matters. Gross income is largely irrelevant.

    For example, in SK while average weekly earnings are 2nd or 3rd highest in the country of more interest is that the basic personal exemption for income tax is the highest in the country (18K+ as of this year), and a family of four with two earners takes home their first 47k tax free, with the highest tax rate only kicking in at 116k in 2012 (120k in 2013).

    However, quite aside from the methodological issue, the tax rates and take home pay, how come when Canadian average wages are below SK and when the average price of a home in Canada is higher than Saskatoon, we see average affordability levels in Canada on the graph below that of Saskatoon?

    I don’t follow the methodology or the conclusions.