{"id":2117,"date":"2016-05-28T11:11:29","date_gmt":"2016-05-28T18:11:29","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=2117"},"modified":"2016-05-27T20:42:52","modified_gmt":"2016-05-28T03:42:52","slug":"what-would-reasonable-home-prices-in-toronto-vancouver-look-like","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2016\/05\/what-would-reasonable-home-prices-in-toronto-vancouver-look-like\/","title":{"rendered":"What Would &#8220;Reasonable&#8221; Home Prices in Toronto &#038; Vancouver Look Like?"},"content":{"rendered":"<p style=\"text-align: justify;\">There was once a time when home prices in two of the county\u2019s hottest housing markets, Toronto and Vancouver, were considered reasonable. No, really.<\/p>\n<p style=\"text-align: justify;\">You just need to turn back the clocks about a decade and a half, Sal Guatieri, a BMO senior economist, tells BuzzBuzzHome News in a recent interview.<\/p>\n<p style=\"text-align: justify;\">\u201cGo back to the start of this century,\u201d he says. \u201cIt was thought that Toronto\u2019s housing market and Vancouver\u2019s were kind of reasonably valued,\u201d recalls Guatieri.<\/p>\n<p style=\"text-align: justify;\">\u201cThey were coming off long periods of steady stagnation, for the most part, so it was thought that prices were much more fairly valued at the time, at least on the basis of incomes,\u201d he adds.<\/p>\n<p style=\"text-align: justify;\">Incomes are key. Pitting home prices against incomes as a ratio is a way to gauge how affordable a housing market really is.<\/p>\n<p style=\"text-align: justify;\">That\u2019s what BMO has done with median family incomes from Statistics Canada and benchmark home price data from the Canadian Real Estate Association.<\/p>\n<p style=\"text-align: justify;\">While Toronto\u2019s price-to-income ratio sits at eight to one and Vancouver\u2019s is hovering near 11 to one, according to BMO calculations, such disparities between earnings and home values were not always the norm.<\/p>\n<p style=\"text-align: justify;\">Guatieri points out that in 2001, the benchmark Toronto home price was 4.3 times the median household income. \u201cSo actually, that was quite undervalued,\u201d he says.<\/p>\n<p style=\"text-align: justify;\">By 2005, the price-to-income ratio had hit five to one in Ontario\u2019s capital. \u201cI would suggest five to one seems reasonable for a large metropolis with attractive amenities, such as Toronto,\u201d pinpoints Guatieri.<\/p>\n<p style=\"text-align: justify;\">\u201cVancouver back in 2005 was six-and-a-half to one and in 2001 was just over five to one, so that gives you some indication of what is kind of the fair value for home prices in Vancouver,\u201d the economist says.<\/p>\n<p style=\"text-align: justify;\">As Guatieri demonstrates with the Toronto example, factors such as amenities and the size of a city influence what\u2019s determined to be fair value in a market.<\/p>\n<p style=\"text-align: justify;\">He says the \u201cconventional rule\u201d is \u201canywhere from three to four times annual family income\u201d but clarifies \u201cI\u2019m not talking about gateway cities or large metropolises that obviously justify much higher price-to-income ratios than smaller cities.\u201d<\/p>\n<p style=\"text-align: justify;\">When that inflow of foreign wealth at least abates or when interest rates go up, we will see a bit of cooling in the housing markets in Vancouver and Toronto.<\/p>\n<p style=\"text-align: justify;\">For Torontonians and Vancouverites looking for a fairly valued home, there are a number of options elsewhere in Canada \u2014 even in relatively big cities: \u201cMontreal, Calgary, Winnipeg, you\u2019re talking all below four to one, so all those markets are very fairly valued,\u201d Guatieri tells BuzzBuzzHome News.<\/p>\n<p style=\"text-align: justify;\">Assuming house hunters don\u2019t have access to a time machine and don\u2019t feel like relocating, Guatieri mentions three triggers for improved affordability, but his outlook isn\u2019t exactly encouraging for those looking to break into the market today.<\/p>\n<p style=\"text-align: justify;\">If interest rates plunged \u201cmuch further,\u201d that could make ownership more attainable. But the economist doesn\u2019t see rates, which are already at historically low levels, going down substantially.<\/p>\n<p style=\"text-align: justify;\">Next, there\u2019s the prospect of higher earnings providing more buying power. \u201cWe\u2019re already seeing fairly strong job growth, it\u2019s very unlikely we will see an acceleration in job and income growth in Toronto or Vancouver,\u201d says Guatieri.<\/p>\n<p style=\"text-align: justify;\">\u201cSo that really just leaves you prices either stagnating and allowing incomes to catch up or ultimately correcting,\u201d he adds.<\/p>\n<p style=\"text-align: justify;\">The bears have been calling for the latter for some time. Remember The Great Real Estate Crash of 2013? Probably not, because despite making a headline, it didn\u2019t happen.<\/p>\n<p style=\"text-align: justify;\">Instead of doom and gloom, Guatieri cites a BMO outlook that\u2019s more dovish and appears to fall in line with a soft-landing scenario.<\/p>\n<p style=\"text-align: justify;\">\u201cOur general view\u2026 is that at some point when that inflow of foreign wealth at least abates or when interest rates go up, we will see a bit of cooling in the housing markets in Vancouver and Toronto \u2014 some very mild decline in prices,\u201d he concludes.<\/p>\n<p><a href=\"http:\/\/news.buzzbuzzhome.com\/2016\/05\/reasonable-home-prices-toronto-vancouver.html\" target=\"_blank\">What Would &#8220;Reasonable&#8221; Home Prices in Toronto &amp; Vancouver Look Like?<\/a> by\u00a0 Josh Sherman | Buzz Buzz Home<\/p>\n","protected":false},"excerpt":{"rendered":"<p>There was once a time when home prices in two of the county\u2019s hottest housing markets, Toronto and Vancouver, were considered reasonable. No, really. You just need to turn back &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2016\/05\/what-would-reasonable-home-prices-in-toronto-vancouver-look-like\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-2117","post","type-post","status-publish","format-standard","hentry","category-real-estate"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What Would &quot;Reasonable&quot; Home Prices in Toronto &amp; Vancouver Look Like? &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2016\/05\/what-would-reasonable-home-prices-in-toronto-vancouver-look-like\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"What Would &quot;Reasonable&quot; Home Prices in Toronto &amp; Vancouver Look Like? &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"There was once a time when home prices in two of the county\u2019s hottest housing markets, Toronto and Vancouver, were considered reasonable. 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