U.S. real estate much more affordable than in Vancouver

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High real estate prices and low incomes have created a Vancouver housing market with limited affordability, but the country's southern neighbor is experiencing a completely opposite situation.

In a recent Vancouver Sun blog post, financial expert Fiona Anderson examines the difference in home affordability between the United States and Vancouver. Anderson cites a BMO Capital Markets report, which found home prices and mortgage rates in the U.S. have decreased enough that the average mortgage payment is less than 15 percent of the median income.

The statistic highlights a significant problem in Vancouver, where a recent RBC study revealed home costs, including mortgage payments, taxes and utilities, account for 90.6 percent of household pre-tax income. That percentage is created by comparing average home price to household incomes in the area, presuming a 25 percent down payment and a 25-year amortization, Anderson said.

"Housing affordability levels are quite good in most parts of Canada and will pose little threat to overall housing demand," said Craig Wright of RBC. "The Vancouver-area market continues to be a major exception, with sky-high property values in upscale neighborhoods making it both extremely unaffordable and the most at risk of a downward correction."

According to the Real Estate Board of Greater Vancouver, home prices in the area are up 7.2 percent from 12 months ago.

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