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Comment by wmil | Hacker News Reader

The other big issue is that there's no local economic boom driving the increase. Which is very confusing to locals -- salaries aren't going up, unemployment is fairly high, but prices are skyrocketing.

Apparently low interest rates are a big driver. If they increase then many people won't be able to afford their mortgages.

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Statistically more people would be able to afford the mortgages because houses would be cheaper and wealth is on a powerlaw distribution. High interest rates is great for poor people for which their labor dominates their wealth.

High interest rates are great for buying a home. Both for the house prices falling, and for having the option of refinancing at a lower rate later. The big complicating factor is that most people buy and sell a house at the same time, and lower interest rates sound like "lower prices".

I think the wrinkle is that many people see rent as a function of mortgage payments and low interest rates and other rebates are seen as a way to lower rent and provide a win-win. Homeowners get value appreciation and renters get cheaper rent. Of course this is a temporary effect and will only persist during a period of accelerating asset price inflation - which is impossible to maintain long term.

At this point, the average million dollar home in the far suburbs of Toronto costs about 4K a month (mortgages, utility bills, etc.). A condo in a better location costs 1500 a month. We're just starting out our family (which is why we need a house, but we can also not depend on my wife's income). A 10K salary results in 6k after taxes. While we could put everything into the house, I am very very afraid to do so. When I've asked how others do it, I get crazy answers from parents helped get the downpayment down big time to unregistered rental suites. Craziest story I've heard is people buying a house and living in the basement. It all makes my head spin.

> salaries aren't going up

This. You can really see the disparity when looking at the divergence between Toronto rental prices (what people who work can afford to pay with their jobs) and purchase prices (what investors can afford to pay, which probably includes a lot of foreign investment and homeowners remortgaging their homes to invest in a 2nd).

Rental prices haven't increased nearly as much as purchase prices.

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