If you've felt like buying a home in Canada has gotten harder over the years, you're not imagining things. The gap between what homes cost and what people earn has stretched wider than at almost any point in modern history.

But here's what makes it interesting: this isn't a simple story of prices just going up. It's more complicated than that. The relationship between housing costs and wages has shifted dramatically across different decades, shaped by everything from crushing interest rates in the 1980s to rock-bottom borrowing costs during the pandemic.

Let's walk through what actually happened, decade by decade.

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The Baseline: Where We Started in 1981

In 1981, the average Canadian home cost less than $100,000. Expressed in 2015 dollars, the national average price of a resale home in 1981 was $198,094. A household earning a median income of roughly $25,000 to $30,000 per year could realistically save for a down payment and manage monthly mortgage payments.

That sounds affordable, right? Not quite.

Because while home prices were lower, mortgage rates hit an all-time high of 21.75% between August and October 1981. People weren't celebrating cheap homes when nearly a quarter of every mortgage dollar went to interest. The inflation-adjusted monthly mortgage payments were around $3,000 to $3,500, similar to what Canadians face today, even though house prices have skyrocketed.

The early 1980s marked a period of peak unaffordability, not because of price, but because of borrowing costs.

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The 1980s and 1990s: Slow Price Growth, Falling Rates

Throughout the 1980s and 1990s, something important happened. House prices remained relatively stable while mortgage rates gradually fell.

After hitting 21.75% in 1981, mortgage rates nearly halved by 1983, reaching 13.5%, and continued declining throughout the decade to 10% by 1987. By the 1990s, inflation calmed down and 5-year fixed rates entered the decade at 12%, gradually decreasing to 8.25% by 2000.

During this period, Canadian housing prices from 1980 to 2001 stayed within a steady and narrow range of 3 to 4 times provincial annual median income, with notable exceptions in Vancouver and Toronto where localized bubbles formed and burst.

Wage growth during this time was modest but steady. From 1981 to 1998, average real hourly wages of full-time workers aged 17 to 64 increased by roughly 4%. Not spectacular, but house prices weren't racing ahead either.

Then something changed.

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The 2000s: The Divergence Begins

Around 2001, Canada's housing market entered a new phase. Home prices in Canada began rising steadily starting in 2001, but the true inflection point came around 2007 and 2008.

What caused this? A few things happened at once.

The 2000s commodities boom, driven by rising demand from China and other emerging markets, boosted Canada's economy. This generated job growth and likely contributed to pressure on house prices, with significant rural-to-urban migration and immigration to Canada.

But the bigger story was interest rates. The 2000s saw mortgage rates ranging from 5.25% to 8.75%, with an average 5-year fixed rate of 6.80%. Following the 2008 financial crisis, rates dropped even further as central banks tried to stimulate the economy.

Meanwhile, wages weren't keeping pace. From 1998 to 2011, average hourly wages of full-time workers increased by 10%, better than the previous period, but by 2010, Canada began experiencing, for the first time, sustained home price growth that significantly outpaced income growth across most major markets.

Canada's home price-to-income ratio remained between six and nine until 2007, but since then has consistently exceeded nine, reaching 10 in 2015, 12 in 2016, and climbing as high as 16 in 2022.

That's when affordability really started slipping away from average Canadians.

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The 2010s: When Everything Accelerated

The 2010s transformed Canada's housing market in ways that still affect buyers today.

From 2003 to 2018, Canada saw an increase in home and property prices of up to 337% in some cities. Vancouver and Toronto led the charge, but other markets followed. Calgary, Edmonton, Montreal, and even smaller cities saw significant appreciation.

What drove this?

Ultra-low interest rates made borrowing incredibly cheap. Ultralow interest rates made borrowing inexpensive and encouraged investors to use mortgage leverage for large returns on relatively small down payments, leading not only to worsening affordability, but also to Canadians carrying the highest levels of personal debt in the top 10 world economies.

When money is cheap to borrow, people can bid more for the same house. And they did.

Meanwhile, from 1981 to 2024, median real hourly wages grew by 20%, with most of this growth occurring after 2003. That sounds decent until you realize house prices more than tripled in many markets during the same period.

By 2016, the OECD warned that Canada's financial stability was at risk due to elevated housing prices, investment and household debt.

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2020-2025: Pandemic, Peaks, and Where We Are Now

The pandemic years brought unprecedented chaos to housing markets.

In 2020 and 2021, the Bank of Canada dropped its policy rate to a record low of 0.25%. The lowest mortgage rate in Canadian history was 2.79% in January 2021 for a 1-year fixed mortgage, and the 5-year variable mortgage rate dropped to as low as 0.88% in late 2021.

Predictably, house prices exploded. People stuck at home, working remotely, suddenly wanted bigger spaces. Cheap borrowing meant they could afford to pay more. In many markets, bidding wars became the norm, with properties selling for hundreds of thousands over asking.

The house price ratio in Canada peaked in the second quarter of 2022, when the price-to-income ratio hit its highest point in modern history.

Then the correction began. As inflation surged, the Bank of Canada aggressively raised rates through 2022 and 2023. Canada house prices grew 0.1% YoY in January 2025, following an increase of 0.1% YoY in the previous month, showing how much the market has cooled.

Canada's index score in the third quarter of 2024 amounted to 136.8, which means that house price growth has outpaced income growth by almost 37 percent since 2015.

Today, a homebuyer who purchases the average home in Canada with a 20% downpayment at current mortgage rates would have a monthly mortgage payment representing 47.9% of the median pre-tax household income of $93,220.

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What the Numbers Really Mean

Let's put this in practical terms.

In 1984, saving a 20% down payment on a $75,000 home meant setting aside $15,000, which could be achieved within a few years of diligent saving for many middle-income households.

Fast forward to 2024, and the average Canadian home now costs over $700,000, with a 20% down payment of $140,000, an amount out of reach for many younger Canadians, even with two incomes.

According to recent reports, it now takes over 25 years for a median-income household in Toronto to save for a 20% down payment on an average home, assuming they can save 10% of their income each year.

The math has fundamentally changed. In the 1980s, a typical home might have cost three to four times the average household income, but today that ratio can easily exceed eight or even ten in urban centers.

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Why Wages Couldn't Keep Up

You might wonder why wages didn't rise to match housing costs. The reality is that wage growth has been remarkably consistent but modest.

From 1981 to 2024, median real hourly wages grew by 20%, but most of this growth occurred after 2003. Breaking that down further, from 1981 to 1998, average real hourly wages of full-time workers increased by roughly 4%, less than half the 10% increase observed during the shorter 1998-to-2011 period.

Some groups did better than others. Median real hourly wages of women grew faster than those of men from 1981 to 2024, with women's median real hourly wages growing 21 to 25 percentage points faster than men's among workers aged 25 to 54 years with full-time jobs.

But even with these gains, wage growth simply couldn't match the acceleration in housing prices, especially in major urban centers where speculation, foreign investment, population growth, and cheap credit all pushed prices higher.

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The Generational Pattern

There's an interesting pattern when you look at unaffordability spikes. Each peak in unaffordability levels corresponded with generational buying waves: the average Baby Boomer was around 26 in 1981 and 34 in 1989, the average Gen X was around 26 in 1999 and 34 in 2007, and the average Millennial was 26 in 2015 and 34 in 2022, all instances of peak unaffordability.

At age 26, people typically have a few years of career experience. By 34, they may have a decade in the workforce and are often looking to grow their homes to support families. When entire generations hit these ages simultaneously, housing demand surges.

This suggests that current unaffordability, while extreme, follows a pattern seen before in 1981 and 1989.

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Where Do We Go From Here?

Housing affordability has shown signs of improvement recently, marking the longest streak of quarterly gains since the 1980s. But we're still far from historical norms.

The historical spikes in unaffordability of 1981 and 1989 did not last forever, and while we may not see the same levels of affordability that existed between the mid-1990s and 2010 again, Canadians have been managing this period of high unaffordability with a reduction in non-mortgage-related debt, helping to stabilize overall debt serviceability.

What does this mean for prospective buyers?

For decades, falling interest rates allowed house prices to rise while keeping payments manageable. With rates starting around 5% today, it may be challenging for house prices to appreciate much beyond the rate of inflation going forward.

That's not necessarily bad news. If prices stabilize while wages continue growing, affordability gradually improves. It's not a quick fix, but it's a path forward.

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The Bottom Line

The relationship between house prices and wages in Canada has fundamentally changed since 1981. We've gone from a market where homes cost 3-4 times annual income with crushing interest rates, to one where homes cost 7-10 times income with moderate rates.

The divergence really began around 2001, accelerated through the 2010s, and peaked in 2022. Today we're in a correction phase, but one that still leaves housing far less affordable than it was for most of the past 40 years.

For those trying to enter the market, understanding this history matters. It shows that housing affordability goes through cycles, influenced by interest rates, wage growth, population dynamics, and monetary policy. The current situation, while challenging, is part of a longer story that continues to unfold.

Whether you're a first-time buyer saving for that down payment or someone watching the market, knowing how we got here helps make sense of where we might be going.