For years now I have been upset about the cost of housing. Especially when it comes to single family homes. our parents bought their first single family home for 150K. We are faced with the new price in 2018 of 545K on average. Anything in the 3000 Sq ft range is 700K for the Ottawa Suburbs.
I decided to look into why and I wanted to share the results with you (the world) or whoever reads this.
There are a few factors that come into play but the major factor is housing affordability. The buying power is much higher now due to 1 single factor.... MORTGAGE RATES
in 2001 rates were 6.25% and in January 2018 rates are roughly 2.85%
What does this mean? (see image for a bit more help)
It means that you would pay $12,719 EXTRA in interest yearly. This is extra money paid to the banks to carry the mortgage for a 3.4% increase in the rate from current levels.
What does this mean 2?
It means that your bi weekly payments were the same on a $370,000 house in 2001 as they are in 2018 on a $520,000 house.
This does not factor in inflation or salaries going up but it does explain a 41% increase.