Demographia: Saskatoon is moderately unaffordable

Demographia is out with their 8th annual affordability report.  Here is last years report.

The Median Multiple Affordability Standard: Historically, the Median Multiple has been remarkably similar among six of the nations surveyed for the stock of homes included in principal national reports. As Anthony Richards of the Reserve Bank of Australia has shown, the price to income ratio was at or below 3.0 in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States until the late 1980s or late 1990s, depending on the nation.5 This historic affordability relationship of a Median Multiple in the range of from 2.0 to 3.0, with 3.0 as the outer bound of affordability continues in many housing markets of the United States and Canada.

Historically, the Median Multiple has been remarkably similar in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States, with median house prices having generally been from 2.0 to 3.0 times median household incomes (historical data has not been identified for Hong Kong), with 3.0 being the outer bound of affordability.


Canada: Housing in Canada is moderately unaffordable with a Median Multiple of 4.6 in major metropolitan markets and 3.4 overall. Housing was generally affordable in Canada as late as 2000. In the early years of the Demographia International Housing Affordability Survey, Canada was generally the most affordable nation. However, this year, Canada ranks third, behind the United States and Ireland.
Among major markets, four were moderately unaffordable and two were severely unaffordable. Among all markets, 9 were affordable, 17 were moderately unaffordable, 3 were seriously unaffordable and 6 were severely unaffordable. The four most unaffordable metropolitan markets were in British Columbia.

For metropolitan areas to rate as 'affordable' and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual household income. To allow this to occur, new starter housing of an acceptable quality to the purchasers with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual household income of that urban market. The fringe is the only supply or inflation vent of an urban market.

Saskatoon had a multiple median of 4.0 derived from a median house price of 274k and median household income of 68k.  The median household income should not be confused with the median family income because it does not include persons not in census families.  The median household income includes both. The Saskatoon median of 4.0 puts Saskatoon in the moderately unaffordable range.  This is down from 4.3 in 2011 which was derived from a median house price of 277k and a median household income of $64,000.  In 2010 Saskatoon came in at 4.6 which was derived from a median house price of $247,600 and a median household income of $56,800.

The only question I have is that looking at SRAR's numbers shows the median house price at about $300,000 in the third quarter of 2011.  This would put the median multiple at about 4.4.  But either way, this is another report that backs my claim of a housing bubble in Saskatoon.

Here is what the "median house price" will get you in Saskatoon 
A 896 sq ft bungalow built in 1931 on 7th street with some updates.
A 826 sq ft modern revenue property built in 2006 on Avenue I on a 25 ft wide lot with two suites, basement one is not legal.
A 816 sq ft bungalow built in 1973 on Birch crescent with a few upgrades.

Historically, Saskatoon's median multiple has been between 2 and 2.7 before the run up in house prices that left incomes behind.

 

Just think, if house price growth followed income growth and did not revert course like they did in 2006, Saskatoon would be looking at a median house price of about $183,000.