One thing rings true however, which is that the average household can manage a house four times their combined income. More than that and there will be downward pressure at some point – sooner if housing is built out and most demand is met, later if you have to wait for excessive foreclosures as people find they really can’t afford $600,000 homes.

Real Estate prices here have increased 203% in a market that was undervalued in comparison to other metropolitan areas, but actually only a mark below the historical average of four times household income. The market average resale price for all homes in this area is currently about $60,000 above the historical average, with single-family homes alone $100,000 above. In Calgary the situation is even more skewed, and that is down from a year ago in both metro areas of the province.

I have some interesting discussions with people about buying real estate now, particularly those who bought property prior to the run-up in prices. Canada may not have as much difficulty related to subprime mortgages the U.S. did, but over-burdened homeowners and the possibility (probabability ?) of looming hyper-inflation will surely put enormous pressure on the downside for home prices here.

Or maybe I just know nothing.

Rick Maher
Edmonton AB