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Wasn’t the middle class in this country supposed to be struggling with the affordability of everyday living?

Didn’t we just have a federal election campaign in which parties competed on ideas to help make life more affordable?

Just checking. When you see the housing market taking off like it has lately, you have to wonder what’s happening. Are conditions for home buying getting better, or are people just buying houses because that’s a thing Canadians do?

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Growth in mortgage borrowing is starting to show the kind of momentum not seen since before the introduction of stress tests in 2018 to ensure buyers can afford mortgages at higher interest rates. The average price in Toronto jumped 7 per cent in November compared with the same month a year earlier, while sales in Vancouver jumped 55.3 per cent (prices fell a bit). October numbers show double-digit price gains in cities such as Ottawa, Windsor, Ont., Fredericton and Halifax.

Let’s take a look at some of the factors supporting the housing market, starting with the employment situation. Until last Friday, when Statistics Canada reported the loss of 71,200 jobs in November, housing appeared to have the support of a strong job market. One monthly jobs report does not make a trend, but it’s still a shock to see jobs disappearing at a level not seen since 2009.

Employment might be the most important economic indicator there is for housing. Home buyers lose confidence if their job situation is shaky, while the risk of mortgage default builds for those who carry a mortgage and lose their job or have their hours reduced.

The previous strength in employment can be seen in the uptick this year in wage increases. Even in that dismal November jobs report, growth in the average weekly wage, at 4.5 per cent, more than doubled the most recent inflation rate. People have been getting raises this year that actually help them get ahead.

Low interest rates built home ownership into a national obsession and they’re certainly helping in this latest leg of growth. RateSpy.com reports that the rate on a discounted fixed five-year mortgage fell 0.8 to 0.9 of a percentage point in the past 12 months, while variable-rate mortgages have come down 0.16 to 0.2 of a point. Falling mortgage rates are a bizarre benefit for housing because such rate declines reflect pessimism about the economy. Regardless, there has been a meaningful drop in the cost of financing the purchase of a home compared with 12 months ago.

Another positive for housing is that growth in borrowing outside the housing market has almost flatlined. The credit monitoring company TransUnion reported Monday that the average non-mortgage debt in the third quarter of the year was $30,038, up just 0.24 per cent on a year-over-year basis.

TransUnion estimates growth of just 1 per cent for non-mortgage debt over the next 12 months, a sign that people understand they need to control their spending to address their debt levels. Non-mortgage debt includes credit cards, credit lines and loans, including non-government student loans.

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Something else that helps housing is the high cost of renting in cities, notably Toronto and Vancouver. According to Urbanation, a source of data on Toronto’s condo and rental markets, the average apartment rent in the city was $2,515 in September, up 6.1 per cent from the same period a year earlier.

It’s unhelpful to directly compare rents to mortgage payments because home owners have plenty of additional costs that renters do not. But let’s do it anyway to document how expensive rents are. If you bought a $600,000 condo in Toronto with 10 per cent down, your monthly mortgage payments at today’s rates would be nearly the same as that average rental bill.

Except for the job market, conditions for home buying overall seem to be favourable. But if conditions are so good, why is it widely accepted that the middle class is financially stressed? Why did the Liberal government feel it necessary to make its first act since re-election the introduction of a tax cut that targets the middle class? In this light, it’s hard to see how Canada rates a hot housing market in many cities.

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