August 17, 2016 -
The Misleading Media and the Frames of Real Estate.
The Toronto media has developed a habit of sensationalizing real estate with bold headlines often lacking foundational support.
Take for example the recent article titled, "Buying a home in the GTA requires a six-figure income".
1. We already know the cost of housing is high. We already know that we need a lot of money to buy real estate.
My own feeling is that personal income of $100,000/year is becoming the annual income that affords a 'middle class' lifestyle (house,car,vacation,rrsps).
2. The headline doesn't necessarily match the article. A household income of 100k is the income supposedly required to afford a 'home' in the 'GTA'. However, most readers will interpret the headline to say that the individual home buyer requires 100k/annum.
3. Dear media, Define home please. Does this mean house? condo? 2 bedrooms? parking?
The study referred to in the article is acceptable until the point where it mashes condos with houses into average housing costs, then works backwards to determine what it will cost to afford real estate (on average).
To me, this is like saying that the average grocery expenditure in the city is $250/week but without truly adjusting for the prestige of the store(=neighborhood), the composition of the actual purchase (quality, amount, etc= type and size of housing).
Then working backwards with that information and saying that grocery buyers must earn at least $100,000 just to buy groceries every week.
My example may be an extreme comparison but the point is that this study means very little and will have only set several confusing and unfounded ideas in 1000's of readers' minds.
*Averages are great to pull trends and comparisons from a static pool but using broad 'averages' of one thing to find a broad 'average' of another thing is not useful.
The reality is that cost of living is not cheap and the price is going up.
A better way to perform this type of study would be to take intervals of income level (with assumptions of down payments, rates, etc) and determine what could be afforded on that income.
Then work backwards to determine where and what type of housing can be afforded.
If you're in the midst of buying, your best move is to discuss mortgage options and affordability with a mortgage professional.
If you want to casually check out 'affordability', Ratehub.ca is a sales tool but will be more helpful than a borderline study and article.
You can always ask me (contact info below), I might have the answers you need and if I don't have answers I will point you in the right direction.