Alan Thomarat gets his data wrong

Every Saturday, Alan Thomarat, who is the president and CEO of the Canadian Home Builders' Association - Saskatchewan and the Saskatoon & Region Home Builders Association publishes a column in the Star Phoenix.    I always enjoy reading his columns whether or not I agree with him.
But in this last Saturday's paper, his column gets an F.  Here is why
Report calling Sask. unaffordable got it wrong:

Housing affordability is rated on a scale, with anything over 3.0 being unaffordable; the survey rated Saskatoon at 4.3, an increase over last year's 4.0; the median house price is 4.3 times the median household income. Regina was measured at 3.8 for the median multiplier, slightly better than Saskatoon.

However, when looking closely at the data used to calculate the median multiples, the housing prices used were from the third quarter of 2012; the median household income, though, is from 2006.

The median house price in Saskatoon is reported at 2012 levels of $283,200; while the median household income is reported at 2006 levels of $66,500. For Regina, the multiplier used a median house price of $266,000 and the 2006 household income of $70,900.
 

See the part I bolded?  Here is what Demographia did.


From Demographia

Median household income data is estimated using national census data or surveys for each metropolitan market, where such data is available (such as the 2011 census in Australia, the 2006 censuses in Canada and New Zealand, the annual American Community Survey in the United States and the annual Census and Statistics Department data in Hong Kong). Alternative government data is used to estimate incomes in Ireland and the United Kingdom, where comparable census data has not been identified. The income base is then adjusted to account for changes to produce an up-to-date estimate, using the best available indicators of median income growth.

 

I'm sure Thomarat also checked Stats Canada's numbers and found median FAMILY income not median household income. Household income is always lower than family income by quite a bit. Stats Canada has numbers for 2005 and 2001.


Saskatoon Median household income in 2005 - All households $49,313

Saskatoon Median household income, 2000 - All households

$41,991

 If Thomarat read the 3rd annual Demographia report (2006 data) he would have found that Demographia used a number of $52,100 for Saskatoon median household income.  So Alan Thomarat's research is flawed in this case.   Demographia's numbers at $66,500 for the median household income for Saskatoon in 2012 are correct or very close.  This would be an increase of 25% from 2006's numbers.  This is just a tad shy of the average weekly wage increase in the province from 2006 to 2012.  Median numbers usually grow less than average numbers.  And for those wondering how the median household income number decreased from the year before can be easily explained by an higher increase in lower paying jobs.  Remember the difference between averages and medians.  Google it if you need to.


He also references RBC's affordability report.

According to RBC's Housing Trends and Affordability Report from November 2012, there is little evidence of undue affordability-induced strain.  The RBC report states, "While properties continued to appreciate for the most part in the third quarter in the province, gains were comparatively more modest (condo prices even fell slightly) and any hit on affordability was easily offset by rising household income."

 

RBC's affordability report is very flawed.  It uses a 25% down payment, gross income among other things that do not paint a complete picture of affordability.  Affordability in this province falls into two categories.  People who bought before the boom are most likely in the affordable category.  And the other side is first time buyers with low down payments who bought after the boom and have a higher likelihood of being in the unaffordable camp.  The 25% down payment is not realistic for first time buyers.  First time buyers are the ones where affordability really matters but unfortunately there is no good data on affordability for first time buyers.

When policy makers, Realtors or anybody in the housing industry such as Alan Thomarat that are not directly affected by housing affordability, the real problem is muted.  If the people in real estate in the most powerful positions have the loudest voices and the housing boom has been very generous to them, not only professionally but financially, how much weight do they give to a "housing bubble"? 

What most policy makers fail to realize is that the students, the young, the future of our society, have experienced house prices rise 4 times faster than wages since the boom began.  Rents have doubled and many young families need both incomes just to make ends meet.  While I will continue to read those Saturday columns for Alan Thomarat, he does have some good stuff, this past Saturday's column was a fail.