Calgarians need to make 6 figures to afford a home: ratehub.ca

Posted Aug 1, 2022 11:48 am.
Last Updated Aug 1, 2022 11:51 am.
Calgarians need to make at least $108,353 a year in order to afford a home as of June 2022, according to ratehub.ca.
That’s a jump of more than $16,000, or 18 per cent, from the website’s last report in March, which listed the required income to buy a home in Calgary at $91,610.
Chris Audette, a real estate expert with The Group at RE/MAX First, says first-time homebuyers will be hit the hardest by this increase.
“They’ve had a uphill battle for the past two years particularly,” Audette said. “Since the beginning of the year, (it’s been) horrible for them, very little to select from, rising interest rates, multiple competitive offers all over the place.”
Audette says because of the Bank of Canada’s interest rate hikes, compounded with lower demand and more inventory in the market, Calgary will probably see somewhat lower home prices. However, he adds that won’t make it easier to buy a property in the city.
“Basically, you’re looking at robbing Peter to pay Paul. Instead of the sellers getting that money from you, the bank is going to be getting even more money from you,” Audette said. “It’s just going to be tougher for new homebuyers to get into and enter the market and build their equity in homeownership for the next bit, unfortunately.”
For people who already own a home, this increase for required income could mean nothing, or it could mean monthly expenses going up. It depends on your current situation — if you’re in a fixed or variable mortgage, or if you’re mortgage is due for renewal.
Audette recommends talking to your lender, banker, or mortgage broker to find out what your options are.
“It could go up, it could go down from here, we’re not too sure where it’s going to go,” Audette explained.
New communities in the city
Audette adds it’s not all doom and gloom when looking at the housing market. While he can’t say for sure what the future holds, there are some things to be optimistic about.
Calgary recently gave the greenlight to build five new boroughs. Audette explains this urban sprawl will give prospective homebuyers more opportunities to break into the market down the line.
“It’s going to increase the amount of supply, which means the average homebuyer is going to have more to select from,” he explained. “With more supply, particularly from builders, they offer more options and incentives as well, so it may be a really good and viable option for a lot of people to move further out from the city core, get a bit more house in a nicer, newer neighborhood, with new construction.”
Looking at the present, Audette says new construction is driving home sales down. With more inventory on the market and less demand for a home, that’s cooling home prices in Calgary.
“They do not have anywhere near the demand that they had just a few months ago,” Audette said. “It’s dropped pretty substantially. We didn’t think we’d see that a few months ago.”
According to ratehub.ca, the average price of a home in Calgary is currently $530,500. That could decrease further the more options there are for prospective buyers.
Audette adds people will often opt to buy a brand new home rather than a home that’s being resold, so if you’re looking to sell your house, it could hurt your chances of getting a good deal because you’ll have to compete with new neighbourhoods.
Will Calgarians feel comfortable house hunting again?
Whether or not Calgarians will once again feel comfortable house hunting in the near future remains uncertain. Despite constant talk of Canada’s housing bubble bursting, or at least significantly cooling, Ari Altstedter, a reporter with Bloomberg News, says things remain tough.
Altstedter told The Big Story podcast that if the Bank of Canada’s interest rate continues to hike, rent payments may no longer cover interest payments on mortgages. He warns more investors could scramble to force-sell.
“That led a lot of people to think, ‘Well hey, this has some of the hallmarks of what got the U.S. into trouble prior to 2008.’ So maybe the same thing is going on in Canada. But on the other side of that debate though is that Canada, unlike the U.S., we have very high levels of population growth due to our high levels of immigration. And so that creates a real demand for housing.”
Meanwhile, Audette says there’s no one-size-fits-all advice on buying a home, adding it will always depend on your personal circumstances. He says it’s a smart move to talk to an expert to get the best advice tailored to your situation.
“It really depends on, you know, are you doing lateral moves? Are you moving up? Are you moving down? If you’re just getting into the market, are you trying to beat an increase in the interest rates because you’ve got a rate hold on something, and it might be good to get in now?” Audette asked. “If you’re not desperate to get into a home, you might be wise to rent for a little bit. We don’t really know where it’s going to go for sure, I don’t necessarily know that we’re looking a bubble bursting, but we are definitely into a recessionary period.”
He says the high interest rates are putting downward pressure on home prices, but those same rates are having a significant effect on buyer capability as well.
“If the timing is right for you, look at it, (be) cautionary, don’t rush into anything,” Audette said. “Talk to your financial advisor, talk to your mortgage broker, talk to your realtor, get your own opinions on what they’re all doing, and then make some educated choices from there.”
Audette says he doesn’t think waiting a long period of time to buy a home is necessarily the best choice at the moment, like it would have been in February and March when prices were “going crazy with multiple offers.”
Things you can do to ease the stress of needing $108,535/year to buy a home
While there are limited options to get around needing a lot of money to buy a home, Audette says there are some things you can do to make it easier on yourself.
One suggestion is to put more money on a down payment, depending on your situation.
“If you can get a gift from your parents, if you’ve got money in savings, or your investments that you can put in towards it, that will help,” Audette said. “Strange as this may sound, putting less money down may be a solution as well. When you’ve got under 20 per cent, it’s an insured mortgage and the banks are protected, so they’ll actually offer you a lower interest rate on something that’s an insured mortgage because they carry less vulnerability and risk with it.”
Audette also recommends buying more affordably. That advice is applicable to anyone in the market to buy a home right now.
“Your first home doesn’t necessarily need to be your dream home.”
Buying a more affordable home and then making renovations is one way to increase the value of the property if you decide to resell in the future, he adds.
“Paint it yourself, put in new cabinet doors or new counter tops, build a garage or develop the basement yourself,” Audette explained.
Minimizing your debt is another way to alleviate financial stress during the homebuying process.
“You don’t necessarily need a fancy car and a rental home. Perhaps having a less expensive car with lower monthly payments and a nicer home can be a way to offset that.”
Other ways to try and offset needing a high income can include:
- Finding a friend or a family member to buy a home with you
- Increasing your credit score
- Qualifying for a variable rate
- Longer amortization periods
- Looking for deals (homes that have been on the market for a while, motivated sellers, recent price drops)
“A lot of people don’t realize they can qualify for more than they can, and a lot of people think they can qualify for much more than they’re actually able to.”