Dave Gonigam – July 23, 2012
- Are Canadians richer than Americans. Well, yes… but for how long?
- Professor Niall Ferguson pinpoints “the biggest trend in economics, and perhaps geopolitics, in our lifetime”
- Byron King on the “white sands” that will speed up a critical step in the mining of metals by 99%
- A Chinese gold scam that could drive investors toward physical metal… an honest, if bizarre, silver offering from a scammy U.S. company… the most vitriolic letter ever addressed to The 5… and more!
Here’s a Monday milestone:
Your typical Canadian is now richer than your average American. On paper, at least.
“Over the past five years,” reports the Toronto
Globe and Mail, “net worth per Canadian household has exceeded net worth per American household (total combined value of liquid and real estate assets minus debt) for the first time.”
The paper cites figures from Environics Analytics that say the average household net worth in Canada was $363,202 in 2011. That compares with a U.S. figure of $319,970. The greenback and the loonie are more or less at parity these days, so the numbers aren’t skewed by currency fluctuations.
But wait, you ask… Isn’t Canada in the midst of a housing bubble? Wouldn’t
that skew the numbers?
If you plug the word “Canada” and then “housing” into Google, the first auto-fill suggestion that comes up is “bubble.” Before “market.” Before “price.”
The question is of more than passing interest to this editor, en route to Vancouver for this week’s
Agora Financial Investment Symposium.
Vancouver is truly a lovely place. It is also one of the world’s most-expensive housing markets. This year, it supplanted Sydney as No. 2 on a list assembled by an outfit called Demographia; Hong Kong is still tops.
Indeed, Vancouver is the inspiration for a website called “Crack Shack or Mansion?” — in which you look at pictures of various homes and guess whether they’re crack shacks or a $1 million-plus properties.
This one’s a mansion, listed for $1,180,000
“Canadians hold more than twice as much real estate as Americans and, once mortgages are factored in, have almost four times as much remaining equity in their real estate,” the
Globe and Mail story goes on.
The part about their equity is good… as long as prices hold up. Right?
To be sure, Vancouver is an outlier when it comes to Canadian real estate. Still, the average home price in Canada last month was C$369,339, according to the Canadian Real Estate Association.
In examining whether such a figure is sustainable, it’s worth asking how it compares with median household income — which in 2010 was C$69,860.
Ouch… The average house price is 5.2 times median household income — rather more than the 2 or 3 times the personal finance experts would tell you is prudent.
At the peak of the U.S. housing bubble in 2006, the average home price was $246,500. Meanwhile, median household income was $48,201. That works out to a multiple of… whaddya know, 5.1 times.
Hmmm….
Read More at Agora Financial:
http://5minforecast.agorafinancial.com/crack-shacks-mansions-and-household-wealth/
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