It’s impossible to have a discussion about real estate without someone mentioning how expensive houses are these days. In Vancouver, the average home price is $638,000 as of January 2010 — almost a 19% increase over the year before. Toronto is $409,000, Calgary $382,000, all jumps from 2009.

It seems to be getting harder and harder for people to afford homes. So what’s happened? Why are homes so darn pricey these days? Recently, Scotiabank put on a real estate panel and answered these questions. So, according to Scotia’s senior economist Adrienne Warren, here are a few reasons why you’re getting priced out of the market.

Low interest rates
It’s may be hard to believe now, but interest rates were around 14% at the start of the 90s — not a great rate for homebuyers. Its slowly dropped since then falling from about 5.75% in 2000 to 0.25% today, making it a lot easier for people to afford homes.

Better mortgage options
In 2006 the Canada Mortgage and Housing Corporation let people take 35-year mortgages on homes — soon after they allowed 40-year amortization periods. (The latter option has since been discontinued.) That’s meant cheaper monthly payments for people and a whole new, and younger, crowd to the home buying game.

Avg. home prices slowed in the 90s, playing catch up in 00s
Pretty much every year from the 60s to the 80s, home prices increase by about 2.5%. Thanks to high unemployment rates and poor economic conditions in the 90s, housing prices declined, on average, 1.5% a year that decade. During the aughts we’ve seen housing prices play catch up, jumping a whopping 5.2% a year, on average.

Strong economic growth
Until recently the 2000s were pretty good for economic growth. According to the Conference Board of Canada the “decade has marked a turnaround for Canada. Its average GDP growth in the 2000s has not only been higher than that of the U.S. but has helped it rank above 13 other peer countries.” That’s meant more people in jobs, more people making money and more people spending that dough on homes.

Baby Boomers were buying
While young Canadians benefited from easier access to credit and more lax mortgage rules, it was debt-happy baby boomers who flocked to the market. More than 68% of people aged 35 to 64 — with a majority coming from the 45 to 64 demographic — bought homes over the past decade.

According to Warren, who presented statistics that were from 2006 (unfortunately a little dated, but still relevant), about 80% of people aged 55-64 owned homes; slightly less Canadians between 45-54 were homeowners. Compare that to about 45% of people 34 and under who owned houses. (That number is likely higher since the 35-year mortgages came into being.)

These are some of the big reasons for the spike in prices, but you can add house flippers and contractors replacing smaller homes with mansions to that list too.

Coming up: what can we expect in the decade ahead?

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