So I came across this list online that shows a few average costs of things in 1958, now I have done a little checking and the Canadian dollar was between .98 and 1.05 roughly then, so not exactly even but very close and finding all of these statistics for Canadian prices exactly hasn’t been completely feasible - but I did find a few and they are very close - and it’s again the concept we are focusing on - the fact that the smallest increases have been sugar and milk - whereas income doesn’t make the top half of increases - coming in 10th out of 15 examples!
1958 2018 increase
New House $12,000.00 $ 650,000.00 5416.67%
Average Income $ 4,650.00 $ 32,994.00 709.55%
New Car $ 2,155.00 $ 33,464.00 1552.85%
Average Rent $ 95.00 $ 1,800.00 1894.74%
University Tuition $ 1,000.00 $ 6,500.00 650.00%
Movie ticket $ 1.00 $ 14.00 1400.00%
Gas $ 0.06 $ 1.20 litre 2000.00%
Stamp $ 0.04 $ 0.85 dom 2125.00%
White Sugar $ 0.45 $ 1.44 5 lbs 320.00%
Milk $ 1.01 $ 4.00 4 l 396.04%
Coffee $ 0.93 $ 4.00 per lb 430.11%
Bacon $ 0.62 $ 6.00 per lb 967.74%
Eggs $ 0.28 $ 3.00 dozen 1071.43%
Lean ground beef $ 0.57 $ 4.00 per lb 701.75%
loaf of bread $ 0.19 $ 3.00 loaf 1578.95%
So, what we are looking at is something we all already know, that the cost of living hasn’t slowed down to let our incomes catch up! Even something as simple as going to a movie takes twice the disposable income now as it did then. So we are shifting our expectations, first time home buyers have aged from their early 20’s to late 30’s and early 40’s. Interest rates are fantastic now - lowest ever, even the prime rate back in 1958 was between 3.5% and 4.8% - our mortgage rates are lower than that now.
This all comes together to say many things - we live in interesting yet difficult times, where things are plenty and often just dangled in front of us, just a carrot out of reach. Buying a first home forces people to manage their own expectations, with concessions being made and buying townhomes and condos, or staying home and living in basements for often decades trying to pool that downpayment together. I will use a couple averages here, 3% rate, 30 yr amortization and you get roughly $2,500/mth payment. Why have they tightened mortgage rules you ask - well if you are a first time buyer who has saved diligently for more than a decade and finally put it all on the line for a home, then the market falls 15%, when your mortgage comes up for renewal you may no longer qualify, the bank may look at your situation and realize that the small market correct has absorbed all of your equity and more and under these terms you don’t qualify for a mortgage.
So in a year look at the situations as a whole - a small market adjustment has just destroyed a first time buyers 2 decades of savings. I would never suggest that you can protect yourself against this happening, you can do your due diligence and try to predict what the market is going to do. Unfortunately, in the process you can get swept up in the pageantry of it all and imagine yourself in your new place, your dream that you have saved for hoping that no matter what happens you can make it work. You can go into this with a smile on your face and the right people in your corner, us who know the factors that cause change - who watch and know the limits you may forget in that moment of excitement. Remember we have no desire to sell you just a house or simply sell your house for you. It’s too hard to find professionals you can trust, to find clients who recognize and appreciate that you care and who comprehend that referring family and friends is not only the greatest compliment you can give us, but the referring of professionals you know you can trust is the most considerate help you can be to your family and friends. We want to help, not once but always!!! mccarthomes.com