Older millennials, adults aged 35 to 44, had debt-to-disposable income ratios around 250 per cent in 2019, while Freestone noted that metric was roughly 150 per cent for the same age group in 1999.
Can confirm we’re sitting around 250% but this is after exercising significant restraint to not take on as much mortgage as the banks would have given us. Everyone I know who bought over the last couple of years went all out and I can’t imagine them being any lower than 300-350%.
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It isn’t just mortgages. I read just a few days ago that the average price of a new car in Canada is $66k. I’m not sure I’ve spent that much on all of my vehicles combined since I bought my first car at 17. Add in other things bought on financing – lots of our friends have travel trailers, ATVs, and such.
I’m super confused, why is everyone bringing up such ridiculous car prices? Both Canada and the US have cheaper cars too. For example a KIA Rio (5 door) is around $17-23k new in Canada. It’s $16k in the US.
Are Americans only considering massive SUVs when they talk about new car prices?
You are talking about least expensive, they were talking about average.
Where are you getting $17K from? According to Kia’s website, they start at $19,933. And that’s pretty much the cheapest new car in Canada. That’s way out of reach for many people, and the used market is insane.
Earlier this year, my 2005 Civic with 301,000km was totaled. I bought it in 2013 for $5,000 with 121,000km. From my research, if I had sold it before it was totalled, I probably could have gotten more than $5,000 for it, even with the extra decade and 180,000km.
Ah, from Google (and the MSRP), now it’s $20k on their site directly. See: https://blog.clutch.ca/posts/6-cheapest-new-cars-in-canada
There are cheaper options actually. My Kia Rio cost 14k€ (and that was with a deal) back in 2015. So it’s not that far off I guess. But that was actually the new price, with navigation, camera for driving backwards and so on with 7 years warranty on top.
Prices suck of course, but on the low end they are still affordable. Mid-tier is probably a lot of leasing (as you’d have to spend a big chunk of life savings on a direct buy) and high tier is only for rich assholes (or company cars).
I went on a rampage in 2019 about SUV costs, the zero miles we put on it, and the pain in the ass that thing was to wedge into my microscopic parking spot downtown at my last job, so I bought a sports car. About 3.5 microseconds after buying the sports car my wife was like I’m pregnant (and she also sucks at driving stick, but moot point). So we got her a barely used Cruze, and we got a pretty good cash deal on it. Happy wife, car actually has a ton of room and she didn’t have to wedge a kid and stroller into a sports car, and all is good. It’s been a great problem free car these past few years too, but I don’t think she’s even put 30k on it total.
So yeah, like 2.4 seconds before COVID, we bailed out of our teeny tiny DINK-dweller condo and now live in the burbs. We don’t get great snow plowing, so we usually have a few days or even a week where the cars are buried in the garage and I can’t get them out because they’ll get stuck, which means the kids are staying home. We both work from home now, and I don’t even drive my car in the winter anymore, and my wife is like I want an SUV again. Basically, I can’t bitch about having to park it downtown, and who cares about the fuel milage it gets, because we barely will drive it anywhere. We have kids plural now, and I mean, I get the appeal. Our latest compromise is a small truck, because I’m also sick of having to try and get 4x6s home from Home Depot in teeny tiny cars, and having to mount bikes, on a damn Cruze. We’ve acquired a great hatrid of roof racks for my (our) bikes, and all the noise that comes from them, so I’ve become excited about being able to have a hitch rack again, or even just filing my bikes into the back of a pickup.
But now we are in this scenario, of what do we sell the Cruze for? The comps are bananas, like they are averaging about $8-12k more than we paid, with more milage. Now I’m not necessarily expecting we are going to get that, like that’s asking, but that’s the comparables. Every time she gets an oil change, my phone literally rings off the hook for a month afterwards. The place we bought it from offered $3k more than we paid for it last month, and I wouldn’t sell it to them because they know what I paid, but that sets a theoretical floor. Basically I’m hoping for 6-8k more than we paid for it at a dealer, and if I go it alone, I’d probably ask closer to 8-10k more. It’s such a friggin bizzare situation.
How many Rios do you see on the road for every F-150?
I see a RAM for every 2 F-150s. 🥲
It was like 12 years ago I was looking at $10k new Kia rio.
My best bud dated this girl that drove one of those basic Kia 4 doors, I think it was the Rio. This was back probably 2003, 2004. If I remember correctly she paid like $12k for it. That thing would shake every filing you had loose. It didn’t have suspension, it had decorative struts that held the wheels on. What a piece of crap. I’ve heard people swear by them, and I know they’ve come a long ways since, but I always think of that POS when I think of Kia.
It’s getting hard to find cars period. I forget where I read this stat, it was only in the last day or two too, but the number of cars being made, and sold for under $30k, it’s like a small handful of models in total. And good luck actually finding many of said models on local lots, the factory production numbers of these cheaper models is super low.
Also you drove by a Kia lot lately? I ride by one near us fairly regularly on my road bike, and that lot is sparse. The only vehicles on it are SUVs, and there isn’t even very many of them. So yeah the internet says the Kia Rio is $17k, but can you actually get one in your hands for that?! I mean sure, maybe one or two. But remember, we are talking averages here, for the whole marketplace.
$60k average price is definitely in line with the observations I’ve been able to make, and it definitely reflects the laneways on my block. You are right, monster trucks and SUVs, but that reflects the current market. I’m the only person on my block that only has cars in their garage.
I’m from Austria, we don’t have that issue in Europe. But people here (luckily) are a lot less into monster SUVs. If I see even one of those taking up the entire lane or blocking my sight at an intersection I’m getting annoyed.
Going to the Kia website I can actually view cars in stock in the entire country. So I could immediately pick a Kia Picanto (that’s the cheapest one) up for €15,840. Or a Kia Rio for €17,440. Though I just saw on the Kia page, they discontinued the Rio (No more new cars coming).
I read just a few days ago that the average price of a new car in Canada is $66k.
And a good used bike is $150.
People, we need to start looking for alternatives that won’t make rich people richer. Buy a *used *car if you must have a car, but don’t keep filling the pockets of these greedy bastards by buying new.
I’m super into urbanism and love my bike, but unless there’s good bike infrastructure in your area, you’re risking your life. I know and keep riding anyways but most people aren’t willing to take that risk. What we need to do is organize to push our governments to provide safe infrastructure for all road users.
i’d settle for more sidewalks in my town
on some streets they just paint a line down the road and call it a sidewalk - one of these is on a road touching an elementary school
I understand the sentiment, but I’m willing to bet that it’s more likely that the average person will die in a car than on a bike.
Yes, there are risks, and yes cycling infrastructure can absolutely help to reduce those risks, but in the greater context I think cycling is still the better option in more ways than one.
For instance, cycling can reduce the chance of the #1 cause of death (heart disease), while cars increase that risk. That alone would make cycling better for health and longevity, even with less than perfect cycling infrastructure. 😀
Even my bikes are like 10k now…
Don’t forget the cost of insurance, maintenance, fuel, etc. According to TechAltar it costs about half a million euros to own something like a VW Golf at the low end, 1.5M euros on the higher end. It’s estimated that the average person spends 30-40% of their lifetime income on their car.
People only see the initial purchase price (which is often ignored because of various deferred payment offers that further increases the price), and the price of gas. Gas alone is starting to reach the price of renting an apartment, yet somehow people still can’t see themselves living without a car.
Insane.
True. I don’t own a car so this completely escaped me.
Oh look, things are getting worse again. I’m just numb to it at this point, it’s all I’ve ever really known.
(Seriously sorry for dumb question) What does that mean for us?
The way I understand it, there are two main implications. First, the higher the debt load, the less people will spend in a rising interest environment. As their (our) mortgage payments go up, we’ll spend less on anything else. The larger the effect, the more significant it is for the rest of the economy. Second, the higher the load, the more people will default or sell in a rising interest environment. The consequences of this one are more varied.
Probably a good time to buy bank stocks, and also build up your emergency fund.
If you have a mortgage, make prepayments as they go straight to principal and will reduce your amortization and exposure to rate increases.
I suggest you also run through your current mortgage in a mortgage calculator and use ratehub to get a good idea of what your upkeep will be, and use that to figure out your cash flow for post-renewal.
Everyone lost their fucking minds and went on bidding spree to buy a house, now the chickens are coming home to roost. I doubt government will be bailing any of these “home owners”
They will those provide financial firms with liquidity so bag holders have someone to sell at a loss.
I’m not sure it’s a mistake, tbh. It was a shit sandwich any way you sliced it.
Rentals are being sold out from under people often enough that renting anything privately owned is an eviction lottery.
There are no 3BR apartments available, so families mostly want houses, which are largely privately owned.
At the time, mortgages were cheaper than rent, and interest rates had been dropping fairly steadily for 40 years. We can look back with hindsight and say people should have predicted interest rates quadrupling, but I don’t think that’s fair.
Sure, people should have known rates would go up, but that’s what the extra qualification “stress test” was for, right? (Or, I image something like that was a common refrain.)
I’m house poor and overextended, personally, but I’m fortunate enough to be able to work more than full time to pay it. It sucks, but it’s still better than being forced to move my kiddos 4 times in 5 years, like my friend.
Maybe this house will be worth half what we bought it for in a few years, but we gotta live somewhere, and the stability of owning is worth quite a bit.
Kind of hard to blame the victims here when it’s not their fault successive Canadian gov’ts failed to stop illegal money coming into Canada in the 90’s – which, once washed through BC casinos, went straight into property purchases that started the housing bubble we’re in now.
If we assume people are capable of making rational decisions and participate in a free market, then they absolutely are to blame for taking on ridiculous debt loads. If we assume the opposite, then their actions were the product of the environment. We seem to want to have it both ways. We want people to be free to do whatever they want without (government) intervention when the number’s going up. For example people were really opposed to the introduction of the mortgage stess test. On the other hand we want to absolve people from responsibility and defer to the environment when the number is going down and they’re suffering post their earlier decisions. “Why didn’t someone do something about X, Y or Z which we perceive is the reason of our suffering.”
Personally I do think people’s actions are a lot more a product of the environment than anything else. If you ask me, most people shouldn’t need to participate in asset markets to have a place to live or have income during retirement. They simply can’t compete. But many fellow Canadians don’t feel this way, especially when the number goes up. And so we are where we are. 🥲
That is the failing of economics and social theories, that people will think and behave in a rational way. People don’t think or act rational all the time. I would argue that for many people, we generally act on feelings and emotions.
“We want people to be free to do whatever they want without (government) intervention when the number’s going up.”
Who is this “we” you speak of?
The Schrodinger’s “we”.
Cats don’t buy houses so they don’t count.
They did this trick in america in 2000s, Canada mostly avoided that fuxkenin
Looks like they are gonna get y’all now.
Buying into a bubble doesn’t make people a victim. Risk was taken and those who were not properly prepared will be fucked.
This is a classic FAFO situation.
With that being said, yeah, big picture all working people getting fucked.
I think the government has been whispering to banks to extend amortizations on variable mortgages. They could play with amortizations of distressed fixed mortgages too upon renewal. Keep people in their properties, paying only interest?
The banks have started doing “infinity mortgages”, in which the lendee only pays the interest and never the principle because of how the interest rats have gone. CTV News did a little primer on infinity mortgages,
When you boil an infinity mortgage down, it sounds like renting since there is no prospect of paying off the principal. Are infinity mortgages here to stay? I don’t know, I do know I won’t have shocked pickachu face when they stay a fixture of the Canadian mortgage market.
It might be the smallest of all evils. Maybe.
Maybe they will do that, maybe it will work. But if they are doing this, i doubt home prices will keep going up. They need low benchmark interest rates to justify current prices.
Agreed. I speculate there’s not much money left to keep the current prices where they are let alone to keep them going up.
They’re talking debt-to-disposable income ratio, which ChatGPT tells me means “Debt over in income after tax.” I don’t think this is necessarily descriptive of someone’s financial situation. I’m over 400% debt-to-disposable income, but I could pay off my mortgage in a week if that made financial sense.
If you’ve got investments returning more than your loan rate costs you, I don’t know why you’d pay down your loan any sooner than you had to.
Do you think your situation is similar to the average Canadian household?
You are not the norm.