Would you pay 500k for a home?

[mojami04]

Falling in love will cost you... in more ways than one.

When I followed my wife to southern Ontario (Canada), I never really contemplated the drastic increase in the cost of living.   I come from a mining community where a home can be purchased for approximately 200-250k.  The move was essential for her to land a full-time teaching position and I was lucky enough to land the same full-time position a few months afterwards. 

That being said, we have been saving for a down payment on a home and the more I go the less I feel like pulling the trigger.  The average home in our area is 480k based on a recent survey conducted by MoneySense Magazine.  Unfortunately, that information is already dated and we've had house price increase another 5% this year.  You all know where I am going with this...

Some will argue, go ahead an rent instead but we all know there's something to be said about owning your property.  What would a Mustachian do? I'm not looking for a 3000sqft home with 5 bathrooms so it's not a question of luxury.  Simply, if I purchase a 500k home, that definitely takes a large chunk of my savings percentage for bricks and mortar.

A similar home rents for 1700$-2000$ whereas a home purchased in Canada with a current fixed rate of 5yrs at 3.39% runs you about 2400$ a month JUST for the mortage then comes property taxes+utilities... the list goes on.

We could crunch numbers all day but the end result is, what would you do in this type of situation? Voice of reason ladies and gentlemen?

Thanks,

Jamie Montpellier

[Gone Fishing]

I'm no expert, and it will be interesting to see what others have to say, but from what I've heard Canada is still in the middle of a housing boom similar to the one the US had 6-7 years ago.  The disparity between the rental rates and values you mention seem to support this notion.  When I bought my first house the mortgage taxes and insurance were LESS than a comprable rental.  It would fall under "timing the market" but I would be inclined to rent, invest the difference, and wait for the bust.  The only problem is if it never comes.         

[AJ]

How long have you lived in this new area, and how long do you plan to stay?

[Rein1987]

The medium home price in my area is about 1M, so I guess the question is not about the $500k.

How long do you consider live in that area? How much do you earn? How does the rental increase? Do you enjoy house ownership?

[Sylly]

We bought our house recently, despite our PITI being greater than rent for a property that would've met our needs. We reasoned:

1. We're staying in the area for the foreseeable future.
2. Our jobs are stable for the foreseeable future.
3. We can afford it.
4. We want a home to make our own.
5. Interests are at historic lows.

My main concern was buying when prices were starting to rise rapidly again. One one hand, maybe we'd buy before it goes up much further; on the other hand, I'd hate a repeat of 2008-9. But, since we're planning to stay in it for many years, the other pros outweigh this one con, which wasn't shared to the same degree by the SO.

Only you can really decide. But if I were in your shoes, I'd look into the state of Canadian RE market. I don't know enough to have an opinion either way, but I were a potential buyer, I'd do my research on it.

[trailrated]

Average in my area is around 700k, I will pull the trigger at some point but most likely about 5 years out.

[Spartana]

Do you "need" a house? Can you live in a smaller place (owning or renting) than a house - like in a one bedroom apt? I imagine that a one bedroom apt would rent for quite a bit less then a house would rent for - and much less then a home mortgage, property taxes, insurance, extra utilities, and maintenance and repair would cost.

That said, I live in a very high COL area housing-wise (coastal Southern Calif) where $500K and above is the average cost for a small older home. I do own a home (paid off) but would choose not to buy here if I was starting fresh. In my situation as a single female who only needs a tiny space, I'd opt to live in a small one bedroom or studio apt (renting) or maybe just rent a room somewhere. Save my money and then, once I was ready to FIRE or change jobs (I'm retired already), I'd take my money and move to a lower cost area and buy a place with cash.

[falcondisruptor]

It seems like you can get a good value out of renting in your area.  Do you want more space/a better location/the hassels of home ownership?  If not, renting might be a great option for you. 

That being said, I've never rented in my life.  Have you looked at smaller fixer uppers? They can be a great way to build your equity and should cost a fair bit less than the "average".

[RunningWithScissors]

My husband and I bought a home when we got together 3 years ago for $450K.  Neither of our $350K bungalows would work for a blended family of 2 adults, 2 teenagers, 2 cats and 2 dogs plus an in home business that requires 900 ft2. 

/start thread hijack/
Fast-forward three years...business still occupies the basement (former legal suite with separate entrance) and  pays the homeowner (me!) enough rent to cover the mortgage.  Kids and all but one cat are gone.  Extensive renovations are done, raising the value to $750K, based on multiple appraisals.  Although having the business in-home is convenient and financially beneficial, we find the rest of the house too large for our needs. 

We're facing a tough decision too...sell our home and invest the proceeds (after paying off the remaining $200K mortgage) to bring our investments over $1M?  Most couples could retire on that, I know!
/end thread hijack/

To answer the original poster's question:  it all depends on the local market conditions.  I do think Canada is teetering on a bubble, but our decision made sense for our location (Edmonton) which has solid, long-term prospects.  Your mileage may vary...

[Beric01]

I selected "Rent and wait", but in your market I would just rent, and pocket the difference. Your area is just too expensive. You know you can FIRE without home ownership at all, right? You just need to save enough passive income to cover the cost of your rent! (I know, this is treasonous to say on the MMM forums).

[marty998]

The medium home price in my area is about 1M, so I guess the question is not about the $500k.

Meeeee toooo. Hard to answer the poll.

One day I'll probably be forced to do it. Even though it feels like a stupidly high price to pay for a home.

[Beric01]

One day I'll probably be forced to do it. Even though it feels like a stupidly high price to pay for a home.

Perhaps because it IS a stupidly high price to pay for a home? Why would you be "forced" to make such a purchase? My area is even more expensive than the OP's. It is nonsensical to buy here. Two options:

• FIRE and move to a different area and buy
• FIRE as a renter

But please, first do the rent versus buy calculation. This calculator is better than the NYT one.

[deborah]

Why not? It's cheap for my area. I'm FI. It's less than my current house is worth - although I like where I live, so I'm not moving.

Actually, that's the key - if you are going to live in a places for a reasonable length of time (at least 10 years), it doesn't really matter how much you pay (if you can afford it). Swapping houses costs a lot of money that you don't get back - of course you may not have to pay stamp duty, real estate agents fees, lawyer fees... where you live, but they really add significantly to the cost of moving and that doesn't include mortgage establishment fees... when you don't pay cash.

[Beric01]

Actually, that's the key - if you are going to live in a places for a reasonable length of time (at least 10 years), it doesn't really matter how much you pay (if you can afford it).

Actually, that's not true. I ran the calculations using the calculator I linked above. For my area, I would have to be staying this area for 40 years before it would be cheaper to buy than rent. Every additional dollar you spend on home ownership over renting an equivalent accommodation is a dollar you could have invested, building up passive income which can then support your monthly rent payments, much like a mortgage. It's an opportunity cost to tie up your money in a home.

In many other markets, owning is the clear winner even if you'll just be there 2 years. But not for my area.

[MikeBear]

I could buy a TWELVE-PLEX here for that kind of money, net twice my present income AND live in one of the apartments for free.

No, I'd never pay that sort of money for a single house. I'd live in a shack or house-share before that.

[Rebecca Stapler]

In our situation, I would. We live in a HCOLA, and we want to live in my hometown, where a $450k is the entry point to home ownership. We have never bought a house, and currently pay $1875/mo for our townhouse-style rental. We want to move to my hometown in the next year because our son will be entering kindergarten and the public school there is awesome. Plus, my parents still live there and we want to be physically close to them. I also have roots in town and still go to church there. So, there are are a lot of non-financial, but still important, reasons why we are planning to stretch ourselves financially. We plan to be there for 20+ years, if possible! So, eventually our house purchase could actually be a decent investment. But that's not why we're doing it.

In your situation, I'm not sure I would. It depends on why you want to own. It sounds like it's not financially optimal to own, so to me there would have to be a reason aside from finances. You should make sure that the home you buy is in the location you want, and you may want to rent there for a while to know if it's the right town for you.

[scottish]

Garth Turner:

http://www.greaterfool.ca/

thinks that home prices in Canada are seriously inflated.     (He also has some very amusing photo-shopped pictures on his web site.   I think the pictures are better than the articles!   But I digress.)

What's the worst case?   House prices crash 50%, interest rates go up to something normal like 6-7% and you have to renew your mortgage but your house is worth less than the balance owing so you have to come up with the difference from somewhere.

I periodically look at buying rental properties, but the numbers don't add up.   The only way to make money in this market is to count on appreciation, and lots of it, not just a bit of appreciation.
Having said all that we still own our house.

I think you should do a risk/reward assessment and decide on that basis.

[MoneyCat]

I would buy a distressed property.  Have you looked into police auctions?

[MsRichLife]

I would only do it if the house was going to be my home for a good long time. We have the same problem in Australia. Property prices are booming and you can't really find houses in our city that are much less than $500K. If we planned to FIRE here, we might buy a renovator in a good area but since we don't plan to stay, we rent. 

[Undecided]

Actually, that's the key - if you are going to live in a places for a reasonable length of time (at least 10 years), it doesn't really matter how much you pay (if you can afford it).

Actually, that's not true. I ran the calculations using the calculator I linked above. For my area, I would have to be staying this area for 40 years before it would be cheaper to buy than rent. Every additional dollar you spend on home ownership over renting an equivalent accommodation is a dollar you could have invested, building up passive income which can then support your monthly rent payments, much like a mortgage. It's an opportunity cost to tie up your money in a home.

In many other markets, owning is the clear winner even if you'll just be there 2 years. But not for my area.

What rent growths, property appreciations and investment returns are you using for that model? Granted there are a range of distinct "markets" in the Bay Area, but when we thought about rent vs. buy on the mid-Peninsula in 2008 (originally expecting to be in the house 6-7 years), we came to the conclusion that for what we were looking at, the better predicted financial answer was to buy. As it happened, we left in four years and it still worked out to our advantage.

[Vilgan]

If you can rent a $500,000 home for $1700 or even $2000 I think you'd be crazy to buy. Why are rents so cheap compared to buying?!? It makes no sense. The only reason to buy vs rent in that situation imo is that you think home prices are going to rise and leveraging yourself will work out to your advantage. That may be, but what if it crashes? Is leveraging yourself in this manner really worth the risk, just to maybe make some money as the home appreciates?

The guideline I've always heard is 1-2% of total house value per month for renting to be worth it from a landlord perspective. 1700 is not just under 1%, its insanely low. I am normally a huge fan of buying and we bought a house in a high COLA area but I'd rent in a heartbeat in your situation.

[Beric01]

Actually, that's the key - if you are going to live in a places for a reasonable length of time (at least 10 years), it doesn't really matter how much you pay (if you can afford it).

Actually, that's not true. I ran the calculations using the calculator I linked above. For my area, I would have to be staying this area for 40 years before it would be cheaper to buy than rent. Every additional dollar you spend on home ownership over renting an equivalent accommodation is a dollar you could have invested, building up passive income which can then support your monthly rent payments, much like a mortgage. It's an opportunity cost to tie up your money in a home.

In many other markets, owning is the clear winner even if you'll just be there 2 years. But not for my area.

What rent growths, property appreciations and investment returns are you using for that model? Granted there are a range of distinct "markets" in the Bay Area, but when we thought about rent vs. buy on the mid-Peninsula in 2008 (originally expecting to be in the house 6-7 years), we came to the conclusion that for what we were looking at, the better predicted financial answer was to buy. As it happened, we left in four years and it still worked out to our advantage.

The key word in your reply is we. I'm single. I need hardly any space at all (currently in a studio apartment, and looking into just renting a room). So the only way owning a home is going to make sense is if I can rent out all of the other rooms in a place I am buying. That or I can somehow buy a tiny house, and such small lots would be illegal.

Add in the lack of flexibility and the fact that I hate the idea of doing maintenance and it's a no-go. But even on the purely financial side, I couldn't make it work out.

[stlbrah]

If you can rent a $500,000 home for $1700 or even $2000 I think you'd be crazy to buy. Why are rents so cheap compared to buying?!? It makes no sense. The only reason to buy vs rent in that situation imo is that you think home prices are going to rise and leveraging yourself will work out to your advantage. That may be, but what if it crashes? Is leveraging yourself in this manner really worth the risk, just to maybe make some money as the home appreciates?

The guideline I've always heard is 1-2% of total house value per month for renting to be worth it from a landlord perspective. 1700 is not just under 1%, its insanely low. I am normally a huge fan of buying and we bought a house in a high COLA area but I'd rent in a heartbeat in your situation.

I'm a firm believe in only buying if the mortgage is less than a rent. When I was staying in dc, no way I was going to buy. Only exception would be situations like austin Tx a few years ago or any area that is up-and-coming at a crazy pace

[greentea]

YES.. $500K for what you call a single family home with 4 bedrooms and 2000sqft house with a little garden, with freehold title? YES YES YES!

Where I am from.. Singapore... you will just get the living room and the kitchen for that amount if you're looking for a house. :)

Its all about perspective!

[TheNorwegianGuy]

The smallest houses here costs about 400-500 000 $, so I guess I would have to say yes on this one... But as long as I am single, I will be able to manage with a small one bedroom appartment just outside the city centre. It will cost me about 350-400 000 $

[alsoknownasDean]

In this city, you'd have the 45-50min each way commute anyway if you only spend $500k on a house and work in the city centre. More likely an hour plus. The median price in this city is around $650K.

Unfortunately there's a lot of pressure here to buy a house (with everyone assuming they will perpetually increase in value). Of course they can only increase above the inflation rate for so long.

I'm waiting. I figure I'll buy when it makes sense financially. At this stage I'm better off renting, especially as I'm single.

[RetiredAt63]

It sounds as if you are in the Greater Toronto Area (maybe Ottawa) in which case those prices are standard.  So run the math, and factor in the emotions, but don't let them rule.

Interesting to see the reactions - some people are ignoring the "location" factor of real estate when they say those values are too high.  My rural bungalow on an acre is moderately priced - in Ottawa a house this size would be on a 50'x90', not 200'x225', lot and cost at least 1.5x what I paid.  From here prices go up as you get closer to Ottawa, for those who want to be near the city but not in it, and then jump again once you are there.  And labour costs are higher in cities, which will also affect house prices.  For example, my car dealer's hourly rate is abut $30 less than the same dealer make in Ottawa.

[golden1]

This question made me laugh. 

I live in the suburban Boston area.  In my town, which is one of the more affordable within commuting distance and with a good school system, 500K gets you a 50 year old home, about 2000 square feet, 2 baths, 3 beds, that will probably require a lot of upkeep and renovations.  We are actually in a gentrifying phase where a lot of these old homes are being bought, torn down and then 400 sqft McMansions built in their place selling for $800K. 

Now, I was fortunate enough to buy a home 15 years ago when homes were more affordable here, and I have seen my house value double in that time.  The towns that surround me are generally even more expensive.  I personally would not pay 500K for a home and didn't, but if I were buying today, I would probably have to spend $400-450K to buy my home. 

The idea is to finish paying off the mortgage, sell the home when my kids are out of the house, buy a much cheaper home north or west, and pocket the rest. 

[Scandium]

The smallest houses here costs about 400-500 000 $, so I guess I would have to say yes on this one... But as long as I am single, I will be able to manage with a small one bedroom appartment just outside the city centre. It will cost me about 350-400 000 $

The Norwegian and Canadia property markets are the most overheated in the world so I wouldn't take this as much comfort. Yes might be timing the market, but in this case I'd be seriously worried, especially with only a 5 year fixed rate.

I don't really see the value of everyone here saying "In my area it costs way more". Not really useful considering all the factors involved. Price-to-rent, income, interest rates, job market, debt levels,

Just quick google:

"The biggest housing bubble in the world is in … Canada ..."
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/06/13/the-biggest-housing-bubble-in-the-world-is-in-canada/

Canada in 'significant' housing bubble | Financial Post
http://business.financialpost.com/2014/08/07/canada-in-significant-housing-bubble/

The Canadian Housing Bubble Puts Even The US To Shame
http://www.zerohedge.com/news/2014-04-27/canadian-housing-bubble-puts-even-us-shame

Canada Has Its Own Housing Bubble
http://business.time.com/2014/01/17/canada-has-its-own-housing-bubble-and-its-about-to-burst/

[HawkeyeNFO]

All real estate is local.  What $500k would buy in Manhattan, NY compared to Manhattan, KS?  Paris, France compared to Paris, TX?  So the OP's question is irrelevant without more constraints on it.

[mojami04]

I disagree with Liberty Stache and HawkeyeNFO stating that the question is irrelevant without more constraints.  Like I mentioned, you can crunch numbers all day and make market comparisons at your leisure.  That being said, this post finds itself on a blog that isn't geared to the multi-millionaire top 1% but rather the "average" joe who can find a way to beat the mass and go against the tide of consumerism and mass consumption of goods.

The relevance of this is would you consider another option rather than accepting your national/regional current real estate market's  overevaluation of home prices and buy knowing that it's going to take a considerable amount of room under the expenses category of your budget.

Notice the poll's answer for d) none of the above is almost as popular as answer b) for renting???  In other words, a good portion of us don't really know what the best alternative would be under these circumstances.

Thank you for your feedback as what you did state (Hawkeye) in regards to different markets call for different prices is spot on...  it just doesn't answer my question.  Yes or no. 

Cheers,

Jamie

[hybrid]

500K buys a very nice McMansion in Richmond, so no, too much house for more money than I could comfortably afford.

[partgypsy]

Me personally no I wouldn't pay that amount but I have access to reasonable housing.
For the poster, real estate is local, local, local. Research and see whether this is considered a temporary boom, and a correction is anticipated. If so, definitely wait for that. Unfortunately in some places there will be no correction because the number of both local and international buyers is larger than the market.  If that is the case then there will be no correction, just an increase in prices. So it is up to you to rent indefinitely, or buy when there is a "cost" to owning versus buying. also make sure that you can afford the house (for me that is 35-30% of income).

[NoraLenderbee]

I did.

[Undecided]

Actually, that's the key - if you are going to live in a places for a reasonable length of time (at least 10 years), it doesn't really matter how much you pay (if you can afford it).

Actually, that's not true. I ran the calculations using the calculator I linked above. For my area, I would have to be staying this area for 40 years before it would be cheaper to buy than rent. Every additional dollar you spend on home ownership over renting an equivalent accommodation is a dollar you could have invested, building up passive income which can then support your monthly rent payments, much like a mortgage. It's an opportunity cost to tie up your money in a home.

In many other markets, owning is the clear winner even if you'll just be there 2 years. But not for my area.

What rent growths, property appreciations and investment returns are you using for that model? Granted there are a range of distinct "markets" in the Bay Area, but when we thought about rent vs. buy on the mid-Peninsula in 2008 (originally expecting to be in the house 6-7 years), we came to the conclusion that for what we were looking at, the better predicted financial answer was to buy. As it happened, we left in four years and it still worked out to our advantage.

The key word in your reply is we. I'm single. I need hardly any space at all (currently in a studio apartment, and looking into just renting a room). So the only way owning a home is going to make sense is if I can rent out all of the other rooms in a place I am buying. That or I can somehow buy a tiny house, and such small lots would be illegal.

Add in the lack of flexibility and the fact that I hate the idea of doing maintenance and it's a no-go. But even on the purely financial side, I couldn't make it work out.

I'm curious about something---it sounds like the comparison you're making doesn't involve types of housing that most people would consider comparable. Is that right? I didn't live in any studio units in the Bay Area, but I know that the one-bedroom apartments I rented in the Bay Area were of a much lower standard than any 1 BR I ever saw for sale, and I certainly understand that paying for a higher standard than you want, or more room than you need, can be a waste it in any case. But I don't know that I'd base any financial conclusions regarding "the market" on a financial comparison of renting a basic studio rental to buying either a larger place or a more luxurious unit.

[sleepyguy]

depends on the area and your current finances.

Where we life you can't find much now under $600k.  I'm glad we got the worst house on the block for $320k at the time :)

[Vilgan]

Lots of comments about how its local or people comparing it to costs in their own neighborhood. Blah.

Other than the 500k price, all the OP really mentioned that is relevant is:

A similar home rents for 1700$-2000$

And that's all he needs to mention. If you can rent a similar home for $1700 to $2000 you would be INSANE to buy imo.

[MKinVA]

The price isn't so much the point as is the answer to the question, do you plan to live there forever, until you retire, til the kids come, etc. If you plan to stay in this town, and pretty much live in the house, you don't care what the market does because you aren't going to be selling. I know it's hard when prices go down and you feel like you got suckered, but prices go up and so do your property taxes.

If you are going to stay there for a long time, spend that time looking for the best deal you can get, buy the house and concentrate on paying it off. If you are just trying to make sure you can make money when you sell a couple of years down the road (thereby having lived for free or make a little profit), that's the gamble a lot of people take and a lot of people lose.

No one knows when the Canadian market will blow up or even if.

[justplucky]

Sure, if my household brought in 200k a year.

[rocketpj]

When we decided to move from a condo into a house we ended up choosing option C - moving out of the city and commuting.  That said, each of us only commute a couple times/week, and work at home the rest.

For us, houses in Vancouver were ridiculously priced.  We had a huge profit from our first condo (absurd - we made more from the apartment than we did working over that 5 year period).  It would have all gone right back into the bubble if we'd bought back in, so instead we moved out of town and restructured our lives somewhat.

Owning a house is expensive, and that mortgage is going to be a burden for decades.  Seriously consider your choice before pulling the trigger.  Interest rates will not be at all-time historic lows forever, and certainly not for the duration of your mortgage.  Could you afford that $500K house if rates went up to 10% (not unreasonable given historic rates)?

[TomTX]

All real estate is local.  What $500k would buy in Manhattan, NY compared to Manhattan, KS?  Paris, France compared to Paris, TX?  So the OP's question is irrelevant without more constraints on it.

Agreed

Disagreed. He put plenty of relevant information in his first post. So, read the first post, then answer the poll.

Rents on similar properties are WAY cheaper. I would not buy.

[kite]

All real estate is local.  What $500k would buy in Manhattan, NY compared to Manhattan, KS?  Paris, France compared to Paris, TX?  So the OP's question is irrelevant without more constraints on it.

Agreed

Disagreed. He put plenty of relevant information in his first post. So, read the first post, then answer the poll.

Rents on similar properties are WAY cheaper. I would not buy.

There is detail provided,  but too limited to be useful.  What matters when you want to buy isn't just the asking prices of the average home versus rent, but your income, other assets and how long you intend to stay.
That's a typical price where I live, and low compared to my what my colleagues and friends.   Still, I'd never do it because I'm content in the most modest home in town. 

[arebelspy]

Lots of comments about how its local or people comparing it to costs in their own neighborhood. Blah.

Other than the 500k price, all the OP really mentioned that is relevant is:

A similar home rents for 1700$-2000$

And that's all he needs to mention. If you can rent a similar home for $1700 to $2000 you would be INSANE to buy imo.

+1.

You're comparing renting to owning.  In that market, renting makes much more sense.

Sure, I'd buy a home that costs 500k.  I'd buy one that cost 3 million real dollars, if the numbers made sense.  Likely though it won't.  Most expensive markets it makes sense to rent. 

OP's market is one example, per the numbers quoted above.

[Bob W]

Only buy a home if you have the money to pay cash for it and then you can get a 3.5% mortgage and invest the difference.    IMHO MMM theory is to not be in debt.

So the real option is to buy or rent a smaller and/or less expensive place.  One you can actually afford.

People say  "buy" and "own" when they really mean "borrow" and "mortgage."  IMHO

[aclarridge]

Actually, that's the key - if you are going to live in a places for a reasonable length of time (at least 10 years), it doesn't really matter how much you pay (if you can afford it).

This is totally wrong! Don't think this way!

The money you spend on a down payment, and the extra you spend to own in this case, does not just disappear if you choose to rent - you can and should use it to invest. Any bad financial decision can be "hidden" by spreading it out over a long period of time and not considering the outcome of the alternative (renting, in your case), but that's just lying to yourself.

Regarding your decision, run the numbers. Use the NYT buy vs. rent calculator if that helps (just google it, too lazy to find the link for you). You will probably find that using the numbers you gave (very similar to my numbers), renting beats owning pretty handily using optimistic assumptions about home price appreciation and pessimistic assumptions about stock/bond returns.

[Gimesalot]

I know this option wasn't included in your poll, but what about buying a place, somewhere outside of your town, as an investment property.  That way you feel like you are invested in the real estate market, you make some cash, but you still don't have to commit to buying an overpriced house in your city.

To answer your question, I would rent.  The peace of mind of having a much lower fixed monthly cost (renting), versus a higher fluctuating cost (buying), for the same type of property is of huge value to me.

[Annamal]

The smallest houses here costs about 400-500 000 $, so I guess I would have to say yes on this one... But as long as I am single, I will be able to manage with a small one bedroom appartment just outside the city centre. It will cost me about 350-400 000 $

The Norwegian and Canadia property markets are the most overheated in the world so I wouldn't take this as much comfort. Yes might be timing the market, but in this case I'd be seriously worried, especially with only a 5 year fixed rate.

I don't really see the value of everyone here saying "In my area it costs way more". Not really useful considering all the factors involved. Price-to-rent, income, interest rates, job market, debt levels,

Just quick google:

"The biggest housing bubble in the world is in … Canada ..."
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/06/13/the-biggest-housing-bubble-in-the-world-is-in-canada/

Canada in 'significant' housing bubble | Financial Post
http://business.financialpost.com/2014/08/07/canada-in-significant-housing-bubble/

The Canadian Housing Bubble Puts Even The US To Shame
http://www.zerohedge.com/news/2014-04-27/canadian-housing-bubble-puts-even-us-shame

Canada Has Its Own Housing Bubble
http://business.time.com/2014/01/17/canada-has-its-own-housing-bubble-and-its-about-to-burst/

Heeeeey you left out New Zealand (which sits handily between Canada and Norway, much to my disgust).

[Lukim]

It seems to me (as an observer from outside the US) that there are,compared to other parts of the world, a lot of very cheap houses in the US.

In major cities in Australia, it is difficult to get a livable house in a reasonable area for less than US$500k.

In major cities in Asia it is a similar issue (and there you are talking about apartments, not houses).  You will be lucky to be able to buy a shoebox apartment in Singapore or Hong Kong now for US$500k.

So it is all relative.

[Undecided]

It seems to me (as an observer from outside the US) that there are,compared to other parts of the world, a lot of very cheap houses in the US.

In major cities in Australia, it is difficult to get a livable house in a reasonable area for less than US$500k.

In major cities in Asia it is a similar issue (and there you are talking about apartments, not houses).  You will be lucky to be able to buy a shoebox apartment in Singapore or Hong Kong now for US$500k.

So it is all relative.

The U.S. definitely has a lot of space and population diffusion. It also depends on what a "major" "city" is. NY, LA and San Francisco price at medians above $500,000. But someplace like Houston's not even close. Houston's big, but it's not a "city" in the same sense as Sydney.

Edit: Veering off topic, but out of curiosity, I just checked on the percentage of the population of the US and Australia that lives in each country's three largest cities. US: About 5%. Australia: About 50%.

[CheckEngineLight]

OP, I am in Ontario (The GTA to be specific) and I feel your pain.

4 years ago I paid $450k for my little bungalow and now they are selling for low $700's.  NOTHING here adds up, it doesn't make sense and I really don't think it's worth buying at all.  Even at $450k I felt I overpaid considering I bought an old fixer upper, which was the only thing I could afford.

The issue is all the foreign money coming into the area, which is pricing a lot of us out of the market.  Unlike 'murica, southern Ontario/Van city mortgage are heavily backed by cash, not people with minimum downpayments.  Is a correction coming? I don't know, but unfortunately as things are progressing and more people continue to come here and park their money in real estate I don't see prices coming down.  Ownership is very costly here, you really need to sit back think if it's worth it.  If it was me, I'd probably relocate, otherwise buckle down and prepare to work like a dog.