Chad Moore Calgary Mortgage Broker

Be Up To Speed With Canada’s Wage Growth And National Income And How That Relates To Calgary Housing Demand.

I’m on a date with this nice young lady and I think a part of natural conversation, at some point, circles around to occupation.

When I tell people I am a Mortgage Broker and work 100% commission some people lock-up. It’s kind of funny in a weird way.

The thought of uncertain income creates a visceral reaction in some people. I totally get people’s reaction because I have the same thoughts. In fact, I’ve been actively seeking coaching and coaching myself over the years to handle my emotions related to swings of my income.

Here’s what I notice about myself …when my income swings up my demand for purchasing increases. For example, last May I bought a new pair of sunglasses for $250!! For me, that’s expensive.

Have you ever noticed increased demand when you’ve gotten a new higher paying job, got a raise or bonus at work??

Depending on your age, you might have lived through some boom years in Calgary. These kinds of economic cycles are often referred to as the “wealth effect”. When I feel prosperous (secure in my job, increasing income, increasing property values, increase in overall net worth etc) my demand for purchases increases.

This then has a spillover effect in the greater economy. Demand for consumer spending helps fuel our economic machine. In several era’s of Calgary’s Real Estate market, the rapid appreciation of people’s homes are enough to spur consumer spending. I feel wealthy so I spend.

Here’s the actual data of wage growth in Canada from Statistics Canada.

Wage Growth Statistics In Canada:

Wage growth, net of inflation, helps anticipate spending demand. To the extent people feel their income is stable or income growth is certain/positive, this is a leading indicator of homebuyer demand.

Just for context, wage growth is a piece of the home buyer demand puzzle. Other factors of buyer demand are net migration, Mortgage qualifying rules (tightening or easing), and overall sentiment.

Wage growth is also closely monitored by the Bank of Canada as a datapoint in anticipation of hiking our Central interest rate too.

(chart above) We can see here that Alberta’s year over year change in weekly earning is less than 1%. Other parts of Canada are seeing a net increase of their purchasing power. The chart below also shows that Albertans, for the most part, are working longer hours than the rest of Canadian workers.

Below is a chart referencing weekly earnings by industry in Canada. All sectors up to Manufacturing seem to increase by up to 2%, matching inflation. Alberta, and other Provinces in Canada, have increased the minimum wage which might be driving other sectors of employment?

Gross Domestic Product is the total value of everything produced in Canada. GDP numbers lag because it takes time to aggregate all the data. Novembers GDP numbers are down month-over-month. The full report from Statistics Canada can be found here. Not really that much positive news to report on.

Conclusion:

Wage growth, certainty of income and income earning potential contribute to home purchase demand. Higher incomes are needed to overcome the hurdle of Canada’s Mortgage stress test. All else being equal, my maximum home affordability had dropped by about 18%. And, shockingly, Calgary’s Real Estate market was down about 17% (purchase volume).

As our economy adjusts to higher interest rates, lower oil prices, less high-end jobs, lower bonus amounts, etc – our housing market will also take time to adjust.

Thank you for reading! Connect with me to help with your Mortgage needs (purchasing, refinancing or renewing your Mortgage).

Talk soon,

Chad Moore