There was a time in Canada when a ‘starter’ or ‘entry level’ home was defined as any dwelling selling for less than $200,000..That time has long passed; today the definition isn’t based on price, but rather as a home that starts as a first-time buyer’s homeownership journey..“Whether they’re small or sprawling, less than $200,000 or more than $700,000, it’s the market that dictates the definition of the starter home,” according to a report from Point2homes.com that looked into the challenges facing renters hoping to buy their ‘starter’ homes..Point2homes.com surveyed Canada’s 50 largest cities, finding only 28% of renters could afford to buy, based on income required to purchase a home priced at half the benchmark selling price in each market..Added stipulations were monthly mortgage payments did not exceed 30% of a renter household income and assuming a 20% downpayment with a loan based on a 5.75%, 25-year fixed-rate mortgage..Widely differing results in the cities surveyed highlight there is no ‘Canadian housing market’ and housing is very much a regional issue..As an example, Point2homes.com reports starter home prices are similar in Windsor and Calgary, but the average renter household income in Windsor is $40,241; in Calgary it’s close to $69,000, meaning Calgary renters make 5% more than what they would need to comfortably afford a mortgage and Windsor renters earn 48% less than the amount necessary to buy a starter home..“Renters in only 14 cities earn 100% or more than what they would need to afford an entry-level home,” says the report..Those cities are, with renter household income (RHI) followed by income required to qualify (IRTQ) for a starter home, based on the following criteria: .Edmonton, RHI $70,573/IRTQ $46,483; St. John's, $56,590/$37,817; Regina, $57,304/$40,894. .Saguenay, $45,739/$33,702; Trois-Rivières, $45,953/$35,775; Quebec City, $52,273/$40,763; Lévis, $52,273/$41,386..Winnipeg, $54,007/$43,989; Saskatoon, $56,156/$47,746; Gatineau, $58,914/$54,205..Sherbrooke, $45,631/$43,528; Terrebonne, $59,342/$56,746; Laval, $59,312/$58,367, and; Calgary, $68,795/$65,339..“Renter household income in Edmonton is around $70,000 and the price of a starter home hovers around $185,000,” says the report. “Assuming a 20% downpayment and a five-year fixed-rate mortgage with an interest rate of 5.75%, Edmonton renters are uniquely positioned to make the transition to homeownership, earning $24,000, or 52% more than the minimum income needed to buy an entry-level home in the city.”.“Homebuyers in the 13 remaining cities on this list may not be as lucky as Edmonton home seekers, but they are much luckier than the majority of renters in Canada’s largest cities.”.A closer look at Calgary..Half the benchmark sales price is $271,500 (based on data from May from the Calgary Real Estate Board). .To the end of May there were seven homes sold for less than $100,000; 87 sales between $100,000 and $149,000; 415 sales between $150,000 and $199,999; 885 sales between $200,000 and $249,999, and; approximately 969 sales between $250,000 and $271,000..That totals 1,823 sales at less than $271,000, 16% of all sales to the end of May. .“Despite all the talk about incomes and home prices and the current definition of a starter home, in the end, it’s the actual share of starter homes on the market that brings the affordability puzzle together.” says the report. .“Only 13 of the 50 largest cities have shares of starter homes higher than 10%.”.Of those 13 cities, only five meet all three criteria for affordability: In Regina, Calgary, Edmonton, Saskatoon, and Winnipeg, renters have the right income, starter homes have the right price and the market has the highest share of starter homes.The remaining 37 large cities have progressively smaller shares of entry-level homes, with 11 of them having virtually zero homes that would be affordable for renters.Only 10 of the 50 cities in the study have starter home prices under $200,000, but not all of them have many homes currently on the market around that price point..The full report is at:.https://www.point2homes.com/news/canada-real-estate/renters-canada-cant-afford-buy-starter-home.html
