You need an income of nearly $180,000 to buy a home in Hamilton
Would-be homebuyers will need to make nearly $180,000 to purchase an average-priced house in Hamilton with a 20 per cent down payment, according to new data from Ratehub.ca.
And even as home prices continue to drop in Steeltown, the income needed to buy a home in the market continues to grow due to higher stress test rates caused by climbing mortgage costs.
Ratehub.ca said it used March 2022 and June 2022 real estate data to make the calculations. The estimations were also based on a mortgage with a 20 per cent down payment, a 25-year amortization period, $4,000 in annual property taxes and a $150 monthly heating bill. The mortgage rates used in the report were based on the average of five biggest banks' five-year fixed rates in March and June.
With those numbers in mind, the mortgage broker found that between March and June of this year, the salary needed to purchase a home priced at $934,700 in the city grew by $8,660 or five per cent to $179,060.
That's despite the average sale price of a home in the city dropping by nearly 12 per cent from $1,060,000 during that same period. In March, the average homebuyer would need to make $170,400, according to the report.
Speaking to The Spectator, McMaster University professor Jim Dunn said that while climbing interest rates have softened the once red-hot housing market, the cost of borrowing has eaten away at any of those supposed savings.
It's a pretty volatile situation right now," said Dunn, who is also the director of the Canadian Housing Evidence Collaborative (CHEC). House prices are not dropping enough to offset those costs."
In a statement, Ratehub.ca co-CEO James Laird said the price of homes across Canada will need to drop significantly in order to neutralize the effects that higher mortgage rates have on the stress test."
Laird said without that drop, home affordability will continue to be impacted significantly" in the current state of rising rates.
Dunn said that the price of homes in Hamilton also remains high, especially after two years of pandemic-fuelled demand that saw many sell their homes in the Greater Toronto Area and move to the city in search of a cheaper market.
Pointing to the report, he noted that folks who can afford a nearly $190,000 down payment on a home are likely those who are graduating" from a townhome to a single-detached home or those who have sold their home and have tons of equity.
And as the latter likely don't need mortgages, he said they can continue to drive up the price of housing and keep it high."
Dunn said one fallout of the increased costs of getting into the housing market could be the tightening up" of the city's rental market as people delay their plans to buy in. And with most pandemic restrictions now gone, the short-term rental market is gearing back up.
It's a real squeeze," he said.
Across the country
Across all major Canadian cities, the annual income needed to buy a home has jumped by $18,000 on average in just the last four months, according to the report.
The highest required earnings were in Vancouver, with a homebuyer needing to make $231,950, while the lowest required earnings were in Winnipeg, with a homebuyer needing to make $78,270.
With files from Canadian Press
Fallon Hewitt is a reporter at The Spectator. fhewitt@thespec.com