yes and no. It depends what you want from/for your house.
I have a half-million dollar house, but I hope by the time I can no longer live in it, I will be close to death. Therefore, whatever I get is just money in my pocket. Let’s work in today-dollars. If it’s only $250,000 then so what? I’d be, say, early to mid 80’s. I’d be lucky to live another 10 years after that; my health at that point would be a good indicator. That’s an extra $25,000 a year income. If I’m at the point where my wife and I can’t handle the house, odds are we aren’t spending a fortune on travel or anything else either. If I need a condo rather than a decent-sized house, then I hope it will at least be an even trade. Your house is only a loss if you really need to sell. It may be a loss since you bought, but if it’s all equity it’s still money in your pocket - the simplest form of accounting.
(Also note there is no capital gains on a primary residence in Canada, but mortgage interest is not deductible either so people tend to pay down mortgages.)
That’s the catch, eh? When it’s time to sell - Will McMansions go down as much or more, than littler houses and condos? I suspect a low tide drops all ships - smaller house or condo prices will also go down, and today’s building boom products will be getting older, tireder, and cheaper.
The other thing - remember gas prices were about to go through the roof before exploding ARMs did everything in? Over a billion each in China and India haven’t forgotten that a car is a nice thing to have. Fracking has delayed price jumps and sated demand for gasoline for a few more years, but that will end eventually - and then the secret to real estate prices will be - location, location, location. A long commute was already a problem in 2008 - worse to come. Houses closer to the city center, or near fast transit, will be more valuable.
There are plenty of people in Canada (and elsewhere, I assume) who can barely make mortgage payments at 3% to 4%. If divorce happens, they then must unload the house - not because there’ equity to split, but because one person can’t make the mortgage. Despite the claim that “market forces determine interest rates” by most central banks, I also suspect that the impact of rate increases on housing debt is foremost on most finance ministers’ minds.
I agree people do this now, but back in the 60s and 70s I remember everyone focusing on total price/income with the idea of paying it off and having no mortgage as soon as possible.
In the 80s (and after I moved to Chicago), everyone started focusing on just the payment and working with the idea their home would appreciate more than the interest they paid. A large part of why I never bought a home here in Chicago is the old mindset - buying a house for 5x my annual gross and hoping for the best just didn’t sit right with me.
Not really relevant to the thrust of thread, but part of the problem in your example is that, if your numbers are right, it means that professors’ salaries (at McGill) didn’t keep up with inflation.
I know you know there are various ways to compare dollar figures over time, but on this site (which I think is the best of the ‘historical comparison’ sites), $17K in 1972 corresponds to $93.5K in terms of purchasing power (i.e. a 5.5X inflationary increase) and an ever higher amount for most of the other bases of comparison (such as ‘income value’, ‘economic status’, ‘economic power’, etc.)
So, basically, your successors got shafted.
(NB - I used US dollars (for 1972 vs 2013) but assume the Canadian figures are reasonably close)
This is also one of the often-mentioned reasons to explain why Canada did not have the real estate debacle seen in the USA. In Canada, mortgage interest is not deductible from income tax - so the incentive is to pay off the house as soon as possible. Yes, people do re-mortgage to get spending cash, but apparently nowhere near as often as in the USA where carrying a full principle has a better benefit. (Plus, Canada’s very conservative banks were additionally constricted by very strict mortgage insurance rules from the government agency CMHC).
I have a similar rule of thumb for judging inflation - in 1972 IIRC the minimum wage for Ontario was $1.80. Now it’s somewhere like $10 or $11 - so yes, between 5x and 6x.
That seems incredibly cheap. My house, about 35 miles outside London, has three bedrooms, one bathroom and is about 950 sq ft.
It is worth about 6 times my salary, or about 9.5 times the average UK salary. Even if you take the average London salary it is still over 7x salary for a house that would be considered a shoebox by American standards.
If I wanted a 2,750 sq ft house around here I’d be looking at paying at least three-quarters of a million. That’s pounds. Or about $1.25 million US.
It’s all about the location. There are plenty of places in the US where a house identical to mine would cost over one million dollars as well. More accurately, the house would cost the almost same as mine, but the dirt it sits on would cost a lot more. If my house was 35 miles from Manhattan, NY it would cost more for just the vacant lot than my whole house cost, but as I’m 600 miles away, that’s not a factor.