There’s an interesting ‘slice of life’ article in Toronto Life that profiles buyers who have overextended to purchase a home. Looking at the numbers in that story you can tell Vancouver is just as bad if not worse:
Their budget inched up, first to $550,000, then 100 grand more. When they saw a detached house in Hillcrest, with its spacious bedrooms, modern kitchen and large yard, it felt like home. It was listed at $589,000, and there were two other interested buyers. Their agent encouraged them to make an aggressive offer of $647,000, a price that was just manageable because the house had a basement apartment they could rent out to help cover the higher mortgage payments. On the night of the offers, Daniel and Louise sat in their car in front of the house, with their competition parked nearby. When the owners rejected the two top bids, the couple had to decide whether to go up or let it go. “Daniel asked me if I thought the house was worth $650,000,” Louise says. “I said that I didn’t think it was worth $250,000, but that’s not what houses are going for in Toronto right now.” They bid $650,000 and the house was theirs.
When they picked up their keys last November, they had few regrets, not even about the cost of the house. “Now we’re in the game,” Daniel says.
But they hadn’t moved in yet. They haven’t had their furnace die during a February freeze, or a tenant’s rent cheque bounce, or a slow leak from the dishwasher rot the floor joists. When you’re overextended by an irrational market and barely making mortgage payments, the smallest house repair can push you over the edge.
I imagine that many first-time buyers in Toronto and Vancouver are getting by on a fairly thin margin, recent stats put the BC provincial savings rate at a negative 7.9% (yes, we owe more than we earn).