Housing markets in both Canada and our neighbour to the south have been affected by rising interest rates and low inventory, but Canadians are particularly affected due to smaller median incomes and less buying power compared to Americans.
According to a new report by Zoocasa, when taking into account median household income and national average home prices, Vancouver and Toronto are even less affordable to live in compared to other major US cities, like New York and Miami.
For instance, in 2021, the median household income in the US was bout CAD 102,777 (US 75,149), while in Canada, the median household income was about CAD 73,954 (US 54,074). This disparity is even more pronounced when looking at the national average home prices. In 2022, when home prices in both countries reached record highs, the average home price in Canada was still over $30,000 higher than in the US, even though Canadians had a median income was $20,000 lower.
To determine the level of housing affordability in 40 cities across North America (28 in the US and 12 in Canada), Zoocasa analyzed median home prices, median incomes, and maximum affordability in each city.
Although Toronto’s median income is comparable to Dallas, with Toronto at (USD) $62,963 and Dallas at $63,985, the median home price in Toronto is $718,519, while in Dallas it is much lower ($393,650).
“This results in a difference of just $107,093 between maximum affordability and the median home price in Dallas, while in Toronto, the gap more than triples that of Dallas,” the report notes. “Households earning the median income in Toronto can afford homes costing around $355,892, which is $362,627 less than the median home price.”
Vancouver beat Toronto as Canada’s most expensive real estate market—it has the third-largest gap between max affordability and median home price. With a median income less than half of that in San Francisco, households in Vancouver can afford a home costing around $332,863, about $543,656 below the benchmark price.
When comparing housing affordability in Kitchener-Waterloo and Houston, which have near-identical median incomes at, respectively, about $60,000 and $60,440, Houston is more affordable by a considerable amount—in Houston, median-income households can afford a home costing about $270,681, which is $59,005 below the median home price of $329,686. Households in Kitchener-Waterloo face a substantial gap of $200,033 between their maximum affordability and the median home price, which is at $539,176.
San Francisco has the largest gap between the maximum affordability of median-income households and the median home price at a difference of $644,338.
“However, of all the cities we analyzed, San Francisco has the highest median income meaning homebuyers have greater buying power,” the report states. Median-income households in San Francisco can afford a home of around $612,162—the highest on their list and nearly double what median-income households can afford in Vancouver and Toronto.
Still, of the eight cities where median-income earners can afford the current median home price, five are located in Canada—Calgary, Winnipeg, Edmonton, Saskatoon, and Saint John.
Calgary has the highest median household income in Canada at $64,444, which gives homebuyers there enough buying power to afford the median home price of $340,741. Edmonton is even more affordable. With a median household income of $62,222, households can afford to buy a home costing around $351,703, which is more than $56,888 than the median home price.
For the calculation, Zoocasa assumed a 20% downpayment was made, and the mortgage was taken out over a 30-year timeline (per term for U.S. borrowers, and amortization for Canadian). US affordability was calculated with a fixed mortgage rate of 6.79%, which was the average as of March 28, while 4.79% was used for Canadian borrowers, which was the best rate available on the week of March 31. Taxes, insurance, heating, and other expenses and debts were not factored into the calculation.