Baby, we got a bubble!?

[James]

Rewinding back to page 627 of this thread when we were discussing the empty nesters choosing to stay in their 'now worth' million dollar homes instead of downsizing into condos, there's an article earlier this week in the Globe & Mail about an elderly couple who are doing just that, staying put.

http://www.theglobeandmail.com/glob...g-on-to-the-home-makes-sense/article22780549/

When holding on to the family home makes sense
GAIL JOHNSON
Special to The Globe and Mail
Published Thursday, Feb. 05 2015, 5:00 AM EST

For nearly 40 years Brian and Kay Irvine have lived in their Ottawa home, which her parents built in 1949. The grandparents of five, who are both in their 80s, can’t see themselves living anywhere else.

“It’s a good house, it’s in a good location, and it’s close to everything we need.” Mr. Irvine says. “The plan is to stay as long as we can.”

Downsizing has never appealed to either Mr. Irvine, a former high-school history teacher and vice-principal, or his wife, who worked as an architect when she wasn’t raising their two children. Although it’s one and a half storeys, they could live on one level if they needed to. Their neighbours help shovel the walks, and the couple has hired someone to tend the garden. Occasionally, they get help with housekeeping as well.

While the Irvines are able to stay in their home, many Canadians find they have no choice but to put their property on the market and use the proceeds to fund a decades-long retirement. Yet for all the talk of retirees using their residence as their nest egg, financial planning often overlooks another element behind the decision to hold onto the house: the psychological factor.

“Quite often the easiest solution when people are getting on in years is to sell the home, because that’s where the bulk of the equity is,” says portfolio manager Darren Coleman, senior vice-president, private client group, at Raymond James in Toronto.

“It’s a simple math problem, but this isn’t really a math problem. This is a lifestyle decision. It’s a very significant emotional decision for people, and it’s one that must be respected and understood before you ever get to the math problem.

“A home isn’t just a place with a roof over your head,” he adds. “It’s family, it’s memories, it’s sadness, it’s joy, it’s our children growing up, it’s our first Christmas together, it’s where we held each other when mom died. It’s all these things. How do you leave that? It’s a part of you.”

The emotional significance of owning a home may be even more pronounced among those who grew up during the Great Depression or heard their parents talk about how difficult it was. For many, home ownership is the ultimate in security.

“For them, owning their home was a major financial goal that they achieved,” Mr. Coleman says. “A home means stability and safety for that generation in a way that no subsequent generation fully appreciates. Nowadays people are running around buying starter homes and flipping properties; a home is just a thing that doesn’t have near the same emotional weight. They’re so much easier to get today that homes don’t resonate in the same way.”

While certain health conditions make it impossible for people to stay at home – mobility issues typically mean multiple levels or a large lot with extensive landscaping are out – other times individual circumstances result in people wanting to remain in place more than ever. Mr. Coleman recalls one client whose husband had developed Alzheimer’s disease, and she felt that it would be far easier for both of them to cope if he remained in familiar surroundings.

There are also times where the math works in people’s favour to stay at home rather than downsize to a condominium, argues Sherry Cooper, chief economic counsel to MDC Partners, a global strategic marketing company.

“Holding onto the house isn’t an irrational thing to do,” says Ms. Cooper, author of The New Retirement: The Economic Implications of Retiring in an Aging Society.

“For many people, downsizing would be more expensive. … The square-foot costs of a condominium are in fact higher than a home. If you’re willing to move far away – say, from the GTA you’re willing to move to Barrie or beyond – there’s no question you could probably downsize and actually take some money out of your home. But if you want to stay in the same location you can’t expect you’re going to use your home to pay for long-term costs, and that’s problematic.

“Where you live is a lifestyle decision, not just a financial decision,” she says. “It’s a very personal thing. A lot of older people feel more comfortable being where their memories are. … People like to stay where they’re comfortable. There are lots of hidden costs in moving, too.”

To assist clients in determining where they’ll live in their later years, Mr. Coleman draws on insight he gained from the Massachusetts Institute of Technology AgeLab, a research centre based within MIT’s School of Engineering.

One of two Canadian financial advisers invited to visit the lab, Mr. Coleman incorporates into planning three key retirement-related questions: Who will change your light bulbs? Who will you have lunch with? And how will you go to get ice cream?

Combined, the queries address how people plan to meet basic day-to-day needs, maintain their social connections, and get around.

“On a beautiful sunny day when you want an ice cream, if you’re 47 you just go out and get one,” Mr. Coleman says. “But if you’re 86, how are you going to do this? Can you still drive? Are there people who can drive you? Is there a public transportation system nearby?

“Those questions are all metaphors for what the last 10 years of your life are going to be like and the challenges you’re going to face,” he says.

Ideally, the question of whether to be or not to be in the family home is one that would encompass both financial and psychological reasoning.

For the Irvines, staying at home is the obvious answer. When the time comes that their needs are greater, they’ll find ways to address them, whether it’s more hired help or the good will of others, such as friends from church or the neighbours who shovel their driveway.

“It’s comfortable, and it serves our needs,” Mr. Irvine says of his home. “You can always get somebody to give you help. You can put in a chair lift if you need to. There are lots of things you can do to work things out. We want to be here.

 

[TheKingEast]

People staying put in their homes just keeps the SFH supply low and the prices high. If you have a nice house in a good location with a bunch of equity in it, why would you downsize and live in a more expensive, poorly built, poorly laid out condo? How would today's condo entice SFH owners over 35+? Maintenance fee is the biggest hurdle IMO. I'm still unsure why the majority are so high to begin with.

 

[interested]

^^^
Ka1: I think the reason predictions have stopped coming is that people have realized on both sides of the argument that external factors that keep coming most particularly by central banks: i.e. Q.E. in China, Europe and the US, BOC lowering interest rates unexpectedly, Finance Ministry stepping in with new rules etc. All of which mean that it makes it difficult to figure what will happen and when.

There is what seems logical to those on both sides of the argument. While I understand that assets will continue to inflate potentially (thank you Bank of Canada for once again lowering rates), it makes it difficult for the market to act in what most who do fundamental analysis in a rationale way. After all, times are not good economically and house prices go up. Usually one would expect due to lack of confidence and a read of the economy the opposite should happen. But yet, bond rates are low, money is cheap, and many are borrowing and overextending. So should the market correct...yes. Will it correct....eventually I think even Central Bankers and Governments will run out of rabbits to pull out of their hats, and things will correct.

I don't believe personally that R.E. is escalating or holding because people think it is worth present values. Nor is the stock market or bond market...both of which are often referred to as "fully priced", a not so veiled reference to expensive. The only thing cheap are currencies and in the race to the bottom, people are buying assets because they can and because they have to stretch to get yield. A crowded market place for any asset drives it price up.

So until we would get to a more free market system again...all bets are off. The only thing I am reasonably certain of is when the psychology changes, it will be quite intense and then as Warren Buffet famously said, we will see who is swimming without any clothes. And for all our sakes, I hope it is not a very significant number because that would result in an unravelling of a significant part of the economy.

Sorry...boring post. At this point I think most would agree Real Estate is expensive...too expensive....but none of us canbase a timre frame to say it will correct anymore. Those who were right were right in many cases for the wrong reasons and those predicting the correction have been wrong but not in their logic but due to "meddling" with the normal market.

 

[interested]

From the Globe today:


Price gap between condos, houses swells to record level

TAMSIN McMAHON

The Globe and Mail

Published Sunday, Feb. 08 2015, 4:21 PM EST

Last updated Monday, Feb. 09 2015, 7:15 AM EST



For many first-time homebuyers, condominiums have been the easiest way to get a foothold into the housing market, a pit stop on the way to a dream home.

But a flood of new high-rise condos and fierce bidding wars for urban detached houses has caused a widening gulf between the price of condos and houses, which last year reached a record high.


In December the average price gap between a condo and a single-family house in the resale market of Canada’s four major cities, Vancouver, Calgary, Toronto and Montreal, hit $320,000, according to data from Brookfield RPS prepared for The Globe and Mail. It has more than doubled in the past decade as the average resale price of a house in urban centres grew 90 per cent, while the price of a condo grew by just 48 per cent.

The discrepancy is starkest in Vancouver, where the average resale house price has shot up 120 per cent since 2005 to $1.1-million, while condo prices have risen by 50 per cent. The gap is smaller, but growing, in markets like Toronto and Calgary.

The causes are predictable. The supply of new listings for urban houses, has followed “an almost uninterrupted downward trend” for several years, said Shaun Hildebrand, senior vice-president of condo research firm Urbanation. That has been driven partly by a lack of newly built homes in urban centres and also by the fact that existing homeowners have been hesitant to sell in case there’s nothing to buy.

On the other hand are the rising number of new condo developments, driven in large part by a push among policy makers to boost density and curb urban sprawl.

But the price gap has profound implications, both for new buyers trying to find their way into the housing market without breaking the bank and for cities struggling to find the right mix of affordable housing.

Increasingly, the price gap between houses and condos reflects the fact that the two appeal to entirely different buyers, with investor-owned condos mainly serving the rental market as young families bid up the prices of detached homes. Even Calgary, which traditionally has had plenty of room to sprawl, has seen the shift toward condo buildings featuring bachelor units and no parking.

The glut of new rental housing has convinced many potential condo buyers to rent instead, driving down the demand for condos.

“There isn’t that same sense of urgency as there once was to get into marketplace because the costs are actually comparatively lower to rent than to buy,” said Mr. Hildebrand.

Meanwhile, the trend toward basement rental suites has made it easier for homebuyers to afford the massive mortgages on their houses, while also competing directly with condos on the rental market.

Despite a trend toward high-density city living, for many Canadians the ideal home is still the detached house, which is why the prospect of losing out on a dream house has become a far more emotional than missing out on a great condo, said Cory Raven, managing broker at Re/Max in Vancouver. The chances that a similar unit in the same building will eventually hit the market are pretty good, while the chance of finding the same renovated house nearby great parks and schools is slim to none.

Some industry officials say the slowdown in condo prices has been good for the market because it has driven out speculative investors looking to buy preconstruction units and then flip them a year later for a huge profit. Today’s condo investors are more often looking to make their money long-term on rental income rather than price appreciation.

“We’re okay with prices in the condo market not climbing as fast as low-rise because it adds some stability into the marketplace,” said Paul Golini Jr., executive vice-president of Empire Communities, which builds both low-rise and high-rise developments in Southern Ontario. “If the price of condos were increasing exponentially, then the land would be increasing exponentially. It’s easy to get caught in that vicious circle of price increases.”

Yet in the rush to encourage urban intensification, cities like Toronto are now struggling to find the right mix of affordable housing to serve an influx of new residents from other provinces or countries.

“One could reasonably make the case that some of the [policy] incentives in place have taken us too far in terms of the shrinking diversity of housing choices,” said Toronto-Dominion Bank deputy chief economist Derek Burleton.

He worries policy makers are focusing too much on development around existing transit corridors, rather than building a more comprehensive transit system that could help unlock new land on which to build a better mix of housing.

By encouraging more high-rise projects, cities haven’t necessarily succeeded in stopping suburban sprawl. In some cases, they have only pushed it farther away.

The fastest-growing communities in Canada, according to the latest Statistics Canada census, are far-flung suburbs like Milton and Stouville, Ont. as well as Squamish, B.C., which sit nearly an hour outside their respective urban cores of Toronto and Vancouver. They have been growing at a far faster rate than the cities they serve as young families move further afield in search of affordable detached homes.

“There’s a little catchphrase that we came up with in the industry: Drive until you qualify,” Mr. Golini said. “You’re driving further away from the city core until you hit the number that allows you to qualify for that price.”

But some say the tide is slowly turning. Builders are increasingly turning away from purely high-rise condo developments and toward mid-rise and townhouse developments in a bid to create more affordable family-friendly housing in the urban core. Changes to Ontario’s building code last month legalizing six-storey wood-frame buildings, which are cheaper than steel and concrete, should also help add mix of new, more affordable low-rise housing.

In some cases condo dwellers are choosing to move up within the condo market rather than fighting bidding wars for houses in the city. The demand for bigger condos is helping drive up the price of units in older buildings in Toronto, which have traditionally traded at a discount to new builds, Mr. Hildebrand said.

At Yonge and Eglinton, in the heart of Toronto’s uptown, Menkes Developments Ltd. is building its first condo project directed to young families. In the Eglinton, which is slated to open in 2018, at least 10 per cent of the units will be family-friendly three-bedrooms and the building will also have a dedicated playroom for kids.

Some buyers are now looking at condos as a long-term family home rather than a stop on the way to a detached house, said developer Alan Menkes. But the shift is happening slowly.

“We’re going to try to do more family condominiums, but the market is going to determine what we can build,” he said. “We don’t want to build things that the market doesn’t want.”

Even for the younger generation of homebuyers trend toward settling down in a condo has been painstakingly slow, meaning the gap between condo and houses is destined to only get bigger in the coming years.

“"There is generation that finds it completely normal to live in a condo and not have any aspiration to buy a home,” Re/Max’s Mr. Raven says. “But they still have parents who they’’ve got to go to dinner with on Sunday and those parents are telling them: ‘you have to buy a house, you have to buy a house.’””

 

[Admiral Beez]

People staying put in their homes just keeps the SFH supply low and the prices high. If you have a nice house in a good location with a bunch of equity in it, why would you downsize and live in a more expensive, poorly built, poorly laid out condo? How would today's condo entice SFH owners over 35+? Maintenance fee is the biggest hurdle IMO. I'm still unsure why the majority are so high to begin with.

That describes what my wife and I will be thinking in 20 years or so. Why would we sell our Cabbagetown semi where we've lived since marriage to buy a condo nearby?

 

[Eug]

That describes what my wife and I will be thinking in 20 years or so. Why would we sell our Cabbagetown semi where we've lived since marriage to buy a condo nearby?

Less work. My sister, who is now an empty nester, revels in the fact she doesn't have to shovel anymore. I was out shoveling my driveway and walkway 3 times this weekend, and some guy in the GTA died of a heart attack shoveling this week too.

My sister's only in her 50s, but she lived in a huge place in London, where big homes on big lots still are affordable for lots of people. She has a beautiful condo now on the waterfront at Tip Top and adores it.

However, a Cabbagetown semi with and tiny garden and no private parking may be more manageable for a 75 year-old couple than say an Etobicoke 3000 sq. foot house with 6000 square foot lot and 4 car driveway, or a London 5000 square foot house on a multi-acre lot. If you had say 2 or 3 kids before and needed that big house, but now are just a couple or even a widower, why would you stay in that big house? However, if you're a couple in a small semi in 2015 and will still be a couple 2035, nothing has changed in terms of occupants of that small semi even at age 70.

In my case I'm in big house on a big lot in Scarborough, with two young kids. I want to redo our kitchen within 10 years, but I personally would be perfectly happy to downsize after I retire. I'd get quite a lot of time out of my nice new kitchen, but then would move to a condo or condo townhouse, to avoid all the extra time involved with owning a house. By that time hopefully our toddler/infant aged kids would have already moved out so instead of four in a house, it'd be two in a condo.

 

[NorthYorkEd]

That describes what my wife and I will be thinking in 20 years or so. Why would we sell our Cabbagetown semi where we've lived since marriage to buy a condo nearby?

Unless you sell your home (or borrow against it), there is no other way to collect on the value of your equity. This may or may not be an issue, depending on personal circumstances. And many downsizers opt to rent rather than buy another property. This provides a fixed cost and an easing of ownership responsibilities, which might be more desirable at an advanced age. The sale proceeds are invested to generate cash and subsidize their rent and expenses.

You also might eventually face health difficulties that make stairs, or larger spaces, harder to navigate or manage. A condo offers more simplicity in terms of lifestyle and household maintenance, and if you are travellers, more security when you leave for extended periods of time.

However, this type of scenario usually plays out best when one cashes out of the "hot" area to move to a lower-cost one. To stay in the same neighbourhood might be financially difficult 20 years or more down the road, whether renting or buying.

 

[TheKingEast]

From the Globe today:


Price gap between condos, houses swells to record level

TAMSIN McMAHON

The Globe and Mail

Published Sunday, Feb. 08 2015, 4:21 PM EST

Last updated Monday, Feb. 09 2015, 7:15 AM EST



For many first-time homebuyers, condominiums have been the easiest way to get a foothold into the housing market, a pit stop on the way to a dream home.

But a flood of new high-rise condos and fierce bidding wars for urban detached houses has caused a widening gulf between the price of condos and houses, which last year reached a record high.


In December the average price gap between a condo and a single-family house in the resale market of Canada’s four major cities, Vancouver, Calgary, Toronto and Montreal, hit $320,000, according to data from Brookfield RPS prepared for The Globe and Mail. It has more than doubled in the past decade as the average resale price of a house in urban centres grew 90 per cent, while the price of a condo grew by just 48 per cent.

The discrepancy is starkest in Vancouver, where the average resale house price has shot up 120 per cent since 2005 to $1.1-million, while condo prices have risen by 50 per cent. The gap is smaller, but growing, in markets like Toronto and Calgary.

The causes are predictable. The supply of new listings for urban houses, has followed “an almost uninterrupted downward trend” for several years, said Shaun Hildebrand, senior vice-president of condo research firm Urbanation. That has been driven partly by a lack of newly built homes in urban centres and also by the fact that existing homeowners have been hesitant to sell in case there’s nothing to buy.

On the other hand are the rising number of new condo developments, driven in large part by a push among policy makers to boost density and curb urban sprawl.

But the price gap has profound implications, both for new buyers trying to find their way into the housing market without breaking the bank and for cities struggling to find the right mix of affordable housing.

Increasingly, the price gap between houses and condos reflects the fact that the two appeal to entirely different buyers, with investor-owned condos mainly serving the rental market as young families bid up the prices of detached homes. Even Calgary, which traditionally has had plenty of room to sprawl, has seen the shift toward condo buildings featuring bachelor units and no parking.

The glut of new rental housing has convinced many potential condo buyers to rent instead, driving down the demand for condos.

“There isn’t that same sense of urgency as there once was to get into marketplace because the costs are actually comparatively lower to rent than to buy,” said Mr. Hildebrand.

Meanwhile, the trend toward basement rental suites has made it easier for homebuyers to afford the massive mortgages on their houses, while also competing directly with condos on the rental market.

Despite a trend toward high-density city living, for many Canadians the ideal home is still the detached house, which is why the prospect of losing out on a dream house has become a far more emotional than missing out on a great condo, said Cory Raven, managing broker at Re/Max in Vancouver. The chances that a similar unit in the same building will eventually hit the market are pretty good, while the chance of finding the same renovated house nearby great parks and schools is slim to none.

Some industry officials say the slowdown in condo prices has been good for the market because it has driven out speculative investors looking to buy preconstruction units and then flip them a year later for a huge profit. Today’s condo investors are more often looking to make their money long-term on rental income rather than price appreciation.

“We’re okay with prices in the condo market not climbing as fast as low-rise because it adds some stability into the marketplace,” said Paul Golini Jr., executive vice-president of Empire Communities, which builds both low-rise and high-rise developments in Southern Ontario. “If the price of condos were increasing exponentially, then the land would be increasing exponentially. It’s easy to get caught in that vicious circle of price increases.”

Yet in the rush to encourage urban intensification, cities like Toronto are now struggling to find the right mix of affordable housing to serve an influx of new residents from other provinces or countries.

“One could reasonably make the case that some of the [policy] incentives in place have taken us too far in terms of the shrinking diversity of housing choices,” said Toronto-Dominion Bank deputy chief economist Derek Burleton.

He worries policy makers are focusing too much on development around existing transit corridors, rather than building a more comprehensive transit system that could help unlock new land on which to build a better mix of housing.

By encouraging more high-rise projects, cities haven’t necessarily succeeded in stopping suburban sprawl. In some cases, they have only pushed it farther away.

The fastest-growing communities in Canada, according to the latest Statistics Canada census, are far-flung suburbs like Milton and Stouville, Ont. as well as Squamish, B.C., which sit nearly an hour outside their respective urban cores of Toronto and Vancouver. They have been growing at a far faster rate than the cities they serve as young families move further afield in search of affordable detached homes.

“There’s a little catchphrase that we came up with in the industry: Drive until you qualify,” Mr. Golini said. “You’re driving further away from the city core until you hit the number that allows you to qualify for that price.”

But some say the tide is slowly turning. Builders are increasingly turning away from purely high-rise condo developments and toward mid-rise and townhouse developments in a bid to create more affordable family-friendly housing in the urban core. Changes to Ontario’s building code last month legalizing six-storey wood-frame buildings, which are cheaper than steel and concrete, should also help add mix of new, more affordable low-rise housing.

In some cases condo dwellers are choosing to move up within the condo market rather than fighting bidding wars for houses in the city. The demand for bigger condos is helping drive up the price of units in older buildings in Toronto, which have traditionally traded at a discount to new builds, Mr. Hildebrand said.

At Yonge and Eglinton, in the heart of Toronto’s uptown, Menkes Developments Ltd. is building its first condo project directed to young families. In the Eglinton, which is slated to open in 2018, at least 10 per cent of the units will be family-friendly three-bedrooms and the building will also have a dedicated playroom for kids.

Some buyers are now looking at condos as a long-term family home rather than a stop on the way to a detached house, said developer Alan Menkes. But the shift is happening slowly.

“We’re going to try to do more family condominiums, but the market is going to determine what we can build,” he said. “We don’t want to build things that the market doesn’t want.”

Even for the younger generation of homebuyers trend toward settling down in a condo has been painstakingly slow, meaning the gap between condo and houses is destined to only get bigger in the coming years.

“"There is generation that finds it completely normal to live in a condo and not have any aspiration to buy a home,” Re/Max’s Mr. Raven says. “But they still have parents who they’’ve got to go to dinner with on Sunday and those parents are telling them: ‘you have to buy a house, you have to buy a house.’””

Everything I've been saying. The gap between house and condo ownership is widening. Buying a house = bidding war where you'll be up against 5-15 other people and bidding against an imaginary person. Risk of paying way over asking and struggling to get a mortgage because the bank may appraise it at much lower than it was puchased for. So, those who are either priced out or don't want the hassle of buying an old house that needs a lot of work for 3/4 of a million dollars are looking at bigger 2 bed condos. Offer list price or just nder that and it's yours. No bidding wars, no overpaying, no uncovering terrible things at the home inspection, etc.

Yes, I paint a negative picture of SFH purchasing but I understand why many buyers are foregoing the high priced houses that need a lot of work for nice, large condos. Exactly what we did. I think there's a lot of potential for bigger 2 bed condos in older (5+ years and over) condos without linear kitchens, windowless bedrooms, and flimsy, sliding glass bedroom doors.

 

[TheKingEast]

That describes what my wife and I will be thinking in 20 years or so. Why would we sell our Cabbagetown semi where we've lived since marriage to buy a condo nearby?

You'd be crazy to sell that house now or ever...lol. Especially for a condo.

 

[TheKingEast]

Less work. My sister, who is now an empty nester, revels in the fact she doesn't have to shovel anymore. I was out shoveling my driveway and walkway 3 times this weekend, and some guy in the GTA died of a heart attack shoveling this week too.

My sister's only in her 50s, but she lived in a huge place in London, where big homes on big lots still are affordable for lots of people. She has a beautiful condo now on the waterfront at Tip Top and adores it.

However, a Cabbagetown semi with and tiny garden and no private parking may be more manageable for a 75 year-old couple than say an Etobicoke 3000 sq. foot house with 6000 square foot lot and 4 car driveway, or a London 5000 square foot house on a multi-acre lot. If you had say 2 or 3 kids before and needed that big house, but now are just a couple or even a widower, why would you stay in that big house? However, if you're a couple in a small semi in 2015 and will still be a couple 2035, nothing has changed in terms of occupants of that small semi even at age 70.

In my case I'm in big house on a big lot in Scarborough, with two young kids. I want to redo our kitchen within 10 years, but I personally would be perfectly happy to downsize after I retire. I'd get quite a lot of time out of my nice new kitchen, but then would move to a condo or condo townhouse, to avoid all the extra time involved with owning a house. By that time hopefully our toddler/infant aged kids would have already moved out so instead of four in a house, it'd be two in a condo.

This is true, but the the amount of money spent on maintenance fees at a condo can go to paying someone to shovel, cut grass, rake leaves, etc at a house.

As for downsizing. It sounds all fine and dandy, but what if I were to tell you that downsizing would actually cost you more money than staying put? Not a little bit, but a lot. I think many home owners (especially the boomers) are faced with this "issue". Have the mortgage paid off or close to it.....and while the prospect of downsizing sounds appealing, it comes at a high cost some are unwilling to pay.

 

[interested]

This is true, but the the amount of money spent on maintenance fees at a condo can go to paying someone to shovel, cut grass, rake leaves, etc at a house.

As for downsizing. It sounds all fine and dandy, but what if I were to tell you that downsizing would actually cost you more money than staying put? Not a little bit, but a lot. I think many home owners (especially the boomers) are faced with this "issue". Have the mortgage paid off or close to it.....and while the prospect of downsizing sounds appealing, it comes at a high cost some are unwilling to pay.

I think a lot of boomers who have been in their homes for many years are just comfortable there. Some even like to pitter patter around the "big space".
I know of 2 people both now late 80's: 1 who sold their home when they were 73...moved to a condo and said it was the happiest day of their life. The other stayed in their home to 88, loved being there and did not cherish the idea at all of having neighbours, an elevator to get to their car, and all the politics of a condo. The 2nd person had a condo in Florida and swore he would never have one as a full time residence though it was fine for 2-3 months.
The point is that people are different and their needs different.

If one is in the right condo, it can be great. If one has terrible neighbours in the wrong condo or home, it can be terrible. If one is very sociable, being in a condo can have merits and can be better located than SFH's when one gets older (walkable and near subway/buses more so than many SFH's.

Personally I am not ready to live in a condo at this time (I am in my early 60's). I like the house and even more so the back yard. That said, I don't particularly enjoy shovelling nor cutting the grass but it is a pleasure to sit in the back yard on a nice summer day and enjoy the peace and quiet.

 

[interested]

From the FP

How micro condos are facing their first real test in Canada this year

Alexandra Posadzki, Canadian Press | February 9, 2015 2:13 PM ET
More from Canadian Press
A rendering of the a micro suite inside Reliance Properties' Janion Hotel project, which is situated on the Victoria waterfront and contains units around 250 to 300 square feet.
THE CANADIAN PRESS/HO-Reliance PropertiesA rendering of the a micro suite inside Reliance Properties' Janion Hotel project, which is situated on the Victoria waterfront and contains units around 250 to 300 square feet.


TORONTO — The appeal of so-called shoebox condos — no larger than the size of two average living rooms — will face its first real test in Canada this year, with an influx of the compact homes set to hit the country’s largest real estate market.
Four years on, economist stands by prediction of Canadian housing's 'day of reckoning'


Investors are betting on big returns from young renters who can’t afford to buy in the red-hot real estate market and don’t mind living in a unit, about 500 square feet, where their dining table might have to fold down into a bed.

Although developers are pitching micro condos as an affordable entry point into the market, brokers say it’s mostly investors — catering to a demographic of young professionals increasingly flocking to the downtown core — that’s driving demand.

Micro suites tend to fetch higher rents per square foot than larger units, as many renters are willing to live in a slightly smaller space in order to save a bit on costs and live closer to the city core.

Shaun Hildebrand, vice president of condo research firm Urbanation, says condos under 500 square feet can bring in well over $3 per square foot, while the rest of the market averages around $2.50 or $2.60.

There are nearly 3,000 micro condo units under construction in Toronto that are slated to be completed this year, Hildebrand says. If investors snatch them up, that could spur developers to build more of the micro units to satisfy demand from investors.

“This is something that the market and developers are going to be paying very close attention to in 2015,” Hildebrand said. “Sometimes we don’t know how strong demand is until we’re shown the supply.”

The challenge comes in securing a mortgage for the micro units. Brokers say Canada’s five biggest banks are hesitant to provide financing for units below a certain minimum square footage, concerned that investors will sell off the properties if the housing market starts to slide.

“If there’s a downturn in the housing market, is the lender going to be able to sell and recover the mortgage financing they provided?” said Christopher Molder of Axess Mortgage.

“Because these units under 500 square feet are relatively new, no one’s tested the market to see how desirable they are.”

The major banks say the size of a property is only one of several factors in the decision to offer financing.

“There are minimum square-footage guidelines that vary market to market, but the most important factor is the condo’s marketability,” CIBC spokeswoman Caroline Van Hasselt said in an email.
In Vancouver, city bylaws dictate that condo units can be no smaller than 398 square feet, although city council has occasionally loosened the restriction down to 320 for rental-only units.

Marketability is determined by factors such as the building’s location, whether the unit has a separate bedroom and whether it comes with a parking spot.

Marcus Tzaferis, the founder of mortgage brokerage MorCan Direct, says some buyers end up turning to credit unions or private lenders who charge higher interest rates.

It’s not only the banks that are leery of micro-living. In Vancouver, city bylaws dictate that condo units can be no smaller than 398 square feet, although city council has occasionally loosened the restriction down to 320 for rental-only units.

Jon Stovell, president of Reliance Properties, would like to see the restrictions scrapped.

“Vancouver has this tremendous affordability problem and yet the city of Vancouver has just gone completely tone deaf to these needs,” the developer says. “They’re keeping a lot of young people out of the market.”
A rendering of a micro loft inside the Burns Block on Vancouver's East Hastings Street.

Stovell has proposed a development at Davie and Hornby Streets that would feature a number of “nanosuites” measuring under 200 square feet. But the proposal is mired in bureaucracy, as the city decides whether the units, which fetch higher rents than larger spaces do, could drive up land values, and exacerbate Vancouver’s affordability problem.

Vancouver and Toronto were identified as among the most unaffordable real estate markets in the recent international Demographia International Housing Affordability Survey. In Vancouver, the report said the median home price was $704,800 while, Toronto, it was $482,900.

Latif also wants to ensure that any communities where micro condos are built have the services needed — from parks to libraries to late-night coffee shops — to support a population of condo-dwellers who will be spending a lot of their time outside of their homes.

“It’s about making sure you’ve got a vibrant community around you that can support you living in a smaller unit,” he says.


My personal view is 500 sq.ft. is not the micro condo...rather it is the stuff they are trying to do in the 300-400 sq.ft. range.
I wonder if we actually get to an excess of condos for rent if these will rent at all when perhaps with competition the 400-500 sq.ft. condo will also be available.

 

[Eug]

This is true, but the the amount of money spent on maintenance fees at a condo can go to paying someone to shovel, cut grass, rake leaves, etc at a house.

As for downsizing. It sounds all fine and dandy, but what if I were to tell you that downsizing would actually cost you more money than staying put? Not a little bit, but a lot. I think many home owners (especially the boomers) are faced with this "issue". Have the mortgage paid off or close to it.....and while the prospect of downsizing sounds appealing, it comes at a high cost some are unwilling to pay.

I think you underestimate the maintenance costs of a house. Sure if you get a small house or a semi with no yard or parking, it can be very reasonable, and I said as much above.

However, if you're coming from a larger place with a larger yard and driveway, then the costs really can add up if you can't do the work yourself. For example, my neighbour was paying the going rate for driveway snow removal from a respected company - $500 per winter - until he got sick of paying that and bought a snow blower. I think that snowblower is probably around $1300, and also needs to be serviced. Luckily he can do that himself since he's an engineer, but for someone like me, it would be around $150 per service although probably more like $200 since I have no way to transport something like that. However, I just use a shovel. Since I can't do all the yard work myself in the summer due to time constraints, I pay a gardener to come in from time to time. I pay her $35 an hour, plus the cost of plants and her small markup. I could buy some of the plants myself on sale but then that defeats the purpose because it wastes my time again, and I don't get as good a selection as she does anyway. Because I'm doing a lot of the weeding and stuff myself, that keeps costs down, but I wouldn't be doing that if I was a senior citizen with back or hip problems. In addition, professional lawn care companies will charge you hundreds per year for aeration, fertilization and grass cutting. Thus, I get aeration only sparingly as needed, and do the fertilization and grass cutting myself.

Condo fees also cover stuff like fixing roofs. A roof on a big house may be $7500, every 15-20 years, so count on $500 per year. That's coming for me in the next 5 years. Also, I just spent thousands fixing my fence. And so on.

I myself have said many times before that home maintenance costs can be thought of as condo fees, but the benefit with SFH is that you can choose what to do yourself and when to do it in many cases. But you still have to do it. DIY just considers your time as being worthless. However, all those potential "savings" from DIY go out the window when you're in bad physical shape, and at that point it just may be time to downsize to a condo. A condo is a lot more convenient, and it might just end up saving you a lot of money too, while at the same time allowing you to capture the equity in that big house you needed when you had those 2.4 kids.

I can tell you, when I lived in a 1000+ square foot condo downtown, my condo fees were way, way less (even in adjusted dollars) than what I pay for maintenance now for my home. However, that's because a 1000+ square foot condo would be a true downsize for me from my home, so there was a lot less space to maintain, and no personal yard of mine, just a rooftop patio. Also, when I bought my condo, I made a point of buying a place with few amenities, so I wouldn't have to pay for them. I didn't want a pool, so I didn't get a condo with one. I didn't want tennis courts, so I didn't get a condo with one. I didn't want a front concierge, so I didn't get a condo with one. I didn't want squash courts either, etc. Hence my condo fees were way lower than those places with all of the above, yet was still in downtown Toronto.

 

[Admiral Beez]

If I sell my house in 40 years (if I make it, I'll be 83 then) and someone wants to knock it down and build something new I still get great value for the land. If you buy a condo built in the 1970s or so and a developer wants just the land, does he buy everyone's units? What if a few hold out? How is the value of the land distributed?

 

[gentlepuppies]

Not sure why people are going on about how expensive houses are relative to condos in Toronto. Condo prices are almost as much as in Vancouver (even though house prices are still very far apart between the cities). That should be a sign that it's condo prices here that are over-inflated.
I mean, check out these amazing deals for detached homes...
A renovated house next to Victoria Park subway for 600k: http://www.remax.ca/on/toronto-real-estate/na-1-sutherland-ave-treb_e3109815-lst
A house by the bluffs backing onto a ravine for 750k: http://www.remax.ca/on/toronto-real-estate/na-4-romana-dr-treb_e3100049-lst

Seeing these really make me loathe to shell out 350k for a 1-bedroom condo with interior bedroom only lol

Let's look deeper at what you're paying for. The 2 detached examples have 2500 and 5000sf of land. Assuming that improvements typically make up less than 100k of the assessed value of an older house (up to 200k with major renovations), most of the value is in the land, about $150-200 per square foot. In the same neighborhood, Carmelina Condos, on a roughly half-acre site, was a $42M improvement (roughly $280k per unit and 150sf of land if divided evenly among the 150 units). The median unit price is $400k, probably higher. ($400k-$280k)/150sf = $800 per square foot of land. The median unit is therefore almost $100k overpriced.