I find all the housing bubble conversations (not here, just everywhere around me!) really frustrating, like we all just go around in circles. I get all the sides and perspectives. But....I have to live somewhere! And I have to live in an area that works for me and my family, and where I can find work. Right now, that means Vancouver Island. Which I LOVE. But which is expensive.
Real estate in Victoria (when my parents and I moved here in the early 90s) was flat for a really long time. It went gangbusters through to 2009ish, then everything just went flat, never really went down. I guess it's been going up again more recently? We moved out of the city to a rural area in 2009, and got a huge amount more for our money, but still paid $400K, and were probably grossing together about $80K at the time . No where near the 2.5x your income that everyone used to talk about. And also no where near what the bank was willing to lend us! We're probably at closer to $120K combined gross now, and the mortgage is less than $300K, so we're closer to the 3x mark now. But that's not including insurance, property taxes, etc. The market's still flat here. If we sold tomorrow, we MIGHT get what we paid. We're planning a lot of sweat equity to be able to break even.
Our mortgage is a little more than rent would be, but only if you don't count our principal as savings. We've looked at moving to tiny condos in the middle of towns, living on our boat, renting cottages on other people's properties. We could save a little, but mostly the savings would be from not gardening/homesteading, etc. But...then we'd be trying to save all those pennies to re-buy the homestead, because that's how we want to live. And likely the "saved" money would then be spent on groceries.
DH is from the Maritimes. Housing is MUCH cheaper; could easily find a home for less than $200K in an area we liked. However, then bigger money goes into heat, property taxes, car insurance, and is lost through lower incomes. Does it not even out?
Maybe home prices will go down. Maybe they will go up. But in the meantime, I live in an expensive area. We have good jobs and a good life. So far, doing something radical to save on housing costs hasn't seemed worth the trade-offs, so we just live in the way that works for us. I wouldn't invest in real estate rentals in my area. But timing the market here also doesn't seem to make any sense. And I don't really think that all this Canadian investment in real estate is really about people making stupid or smart decisions; it's just people needing to pay for a place to live, in markets they don't have a lot of control over. I mean, you can optimize in every city; there's always a range from poverty to ridiculous mansion life, and people do do stupid aspirational things. But I really think that a lot of people are just stuck within a set of options that are all imperfect.
As another quick example, my sister in Vancouver gave the following insight: people in Vancouver who own houses are indeed spending 50-70% of their incomes on their homes in order to buy (or often even renting). If you're lucky, the 30% of your income that's leftover is still enough in $ to be able to afford the other necessities of life. Recent studies show that there's no real advantage to living in the city vs the suburbs; the costs even out, so it becomes a lifestyle decision.
The thing that always strikes me in Vancouver (besides that there is a LOT of $ circulating in the upper classes) is that a lot of the ordinary houses are not particularly well maintained. It costs so much just to own the house that there's not a lot of money left for maintenance or updating, unless you are of the super-wealthy.
I don't know really where I'm going with this, except to say again that I think most people are just trying to do the best they can in imperfect situations where food, housing, and utility costs are rising, and wages are often flat. Credit makes up the gap. Some people take that WAY too far because of aspirational consumerism, but others are just not willing to live at a level of poverty that would allow them to create more savings. I don't blame them; I struggle with that too. That's why I worry about the larger economy--I think a LOT of people don't have a lot of wiggle room. And I think things are going to get worse before they get better.