Income of $167,000 needed to buy average Hamilton home: Ratehub.ca
The required salary to purchase an average-priced home in Hamilton with a 20 per cent down payment has dropped by more than $11,000 since June, recent data from Ratehub.ca shows.
The tumble comes as home prices in Steeltown continue to cool as rising mortgage rates push some would-be buyers to wait on the sidelines, causing fierce competition to fall to the wayside.
Ratehub.ca said it used real estate data from March, June and August 2022 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 the five biggest banks' five-year fixed rates in March and June.
With those numbers in mind, the mortgage broker found that between June and August of this year, the salary needed to purchase a home priced at $862,300 in the city fell by $11,560, or by 6.5 per cent, to $167,500.
In June, a would-be buyer would have needed to make $179,060 to buy a house priced at $934,700, according to Ratehub.ca.
Hamilton was the only city out of the 10 looked at in the report where getting into the market has become increasingly more affordable since March of this year - even if only by a couple thousand dollars.
According to the Realtors Association of Hamilton-Burlington, the average price of a home in the region dropped around 20 per cent between March and August, falling from $1,073,342 to $858,405.
Speaking to The Spectator, McMaster University professor Jim Dunn said just as the Bank of Canada intended, climbing interest rates have put a bit of a chill" on house prices, and in turn, are allowing a little more" access to home ownership.
Things do appear to be levelling off," said Dunn, who is also the director of the Canadian Housing Evidence Collaborative (CHEC). It looks like we're getting to a point where the cost of borrowing isn't outstripping the declines in housing prices."
In a statement, Ratehub.ca co-CEO James Laird said if those rate hikes stop happening in the near future and home prices continue to drop, affordability in the city would keep improving."
However, if rate hikes were to continue and home prices were to stabilize, that scenario would eat away at affordability in the region, Laird noted.
Dunn said despite the increase in housing affordability, recent census data released by Statistics Canada showed a decline in home ownership rates, meaning there is extra pressure on the rental market.
That demand has caused rent to climb, eating away at tenants' ability to save for a hefty down payment - which according to the calculation the mortgage broker used, would be approximately $172,460.
It's a tricky situation," said Dunn.
Across the country
Across all major Canadian cities, the annual income needed to buy a home dropped by an average of $5,727 in just three months, according to the report.
The biggest change was in Toronto, with a homebuyer now needing to make $231,950, marking a drop of more than $12,000. The smallest change was in Calgary, with a homebuyer now needing to make $107,510, marking a drop of just $900.
Fallon Hewitt is a reporter at The Spectator. fhewitt@thespec.com