Looking at comparables in the Ottawa area, nothing has sold in the last 4 weeks. prices from ($300K – $370K). July is the big “POP”.

THANKS LEFTEST, having said that, everytime the liberals (or NDP) are in power, its at their level (national or provincial where they mess up the economy. Graphs don’t lie, going all the way back to the 50s, liberal leadership has always brought down the economy.

Take TO for example: The ratio computed errantly is 6.1, median household income to average sales price. Mixing median and mean statistics for data that is NOT normally distributed is a huge error and is very likely to give a false inference.

There are a few things to consider here. First the median income in Toronto is somewhat depressed by a number of poor neighbourhoods and the fact that there are a number of students in Toronto making low wages not even considering the home ownership game. If one looks at Oshawa or Hamilton then the median household incomes are $87,500 and $79,000 (approx.) which is significantly higher than TO.

The second thing to consider – and this is late to the game here – is that average monthly sales figures are hugely distorted by “extreme” tail end events. In Oct 2009 there were 95 houses sold for more than $1.5 million. There were 624 (out of 8476) homes sold for over $750K. This hugely skews the average upward. Thus the average sales price for Toronto in Oct 2009, which many consider bubbly again, was $423,577. The median sales price was $357,000, a substantial difference. Consider that 61.2% of the homes sold in TO in October sold for less than $400K, or $23,577 below the average. It’s probably closer to 65% that sold below the average sales price. In fact 77% of single family homes sold for less than $500K.

Since neither incomes nor asset prices are normally distributed, in fact both are right skewed and somewhat heavy tailed, using a simple ratio is fraught with errors if one is attempting to gauge the health of the market and one is very much making a HUGE error if one is comparing medians and means, since there is nearly a $70K difference between the two.

Another problem is that average monthly sales figures are not comparable over time – which is why there is a National Bank House Price Index based on a repeated sales measure similar to the Case-Shiller Index – which results in errant calculations of price gains. One cannot separate the compositional changes that are occurring from the pure price function.

The other fly in the ointment here is that urban centres have always had higher house price / household incomes than the 3 times multiplier rule of thumb. That three times multiplier is something that is an average across an entire country and is somewhat of a historical anachronism. As the country continues to urbanise, one will continue to see that average stat climb to reflect the reality of a more urban environment.

http://list.canadianbusiness.com/rankings/bestplacestolive/2008/housing/Default.aspx?sub=n2&df=bestcities&sc1=3&d1=a&sp2=1&eh=ch
or
http://tinyurl.com/68wcj3

They both should link to the same place. It contains some great data over there. Now the question becomes, is it the ones that are above three that need to come down, or is it the ones below three than need to come up in price?

I also don’t know when they collected their data, but the Ottawa-Gatineau area faired really well, listed as 2.93 on their chart.

Median family income: $84,554
Target home price: $169K – $254K
Actual average selling price: $272,618
Cost Ratio: 3.22

I think we’re well in to bubble territory in many cities. Here was my comment from then:

As an example of what I’ve done here I’ll be showing one example of my home city in Saint John, NB. ‘The Daily’ lists the annual median income for 2005 as $57000 in Saint John. If I add in the average Canadian income increase of 2.1% for two years we get an annual 2007 income of around 59400. This puts the ‘target home price’ at somewhere between 118,800 and 178,200 (2 – 3 times median salaries). The CREA website shows my homes city average selling price as $135,193. This puts the average home at around 2.3 times median salary; making a nice affordable city. I Don’t mean to toot my own horn, no one wants to live here cause it is known as the anus of Canada for a reason.

Lets look at some other cities:

Halifax, NS
Median 2007 Income: 67400
Target Home Price: 134,800 – 202,200
Actual Average Selling: 209,000
Cost Ratio: 3.1

Montreal, QC
Median 2007 Income: 61100
Target Home Price: 122,200 – 183,300
Actual Average Selling: 242,000
Cost Ratio: 3.96

Toronto, ON
Median 2007 Income: 64400
Target Home Price: 128,800 – 193,200
Actual Average Selling: 395,000
Cost Ratio: 6.1!

Saskatoon, SK
Median 2007 Income: 66300
Target Home Price: 132,600 – 198,900
Actual Average Selling: 255,000
Cost Ratio: 3.8

Calgary, AB
Median 2007 Income: 78600
Target Home Price: 157,200 – 235,800
Actual Average Selling: 400,000
Cost Ratio: 5.1

Vancouver, BC
Median 2007 Income: 61300
Target Home Price: 122,600 – 183,900
Actual Average Selling: 566,000
Cost Ratio: 9.2, holy freakin cow!

It’s interesting to see the numbers in front of you. I think the prices in a few places are simply out of control. That can’t be sustained for long periods of time for obvious reasons.