The Housing Market needs to crash.

[Urban Shocker]

Undesirable, rundown places such as Cabbagetown offered the epitome of the "crappy house in a marginal zone" scenario, 40 or 50 years ago when the ideal was a ranch-style bungalow in the suburbs. Young people with creativity moved in and took advantage of the opportunities that such housing stock offered in those days. Surely there are equivalents today, and young people smart enough to take advantage of the opportunity that's offered?

 

[BobBob]

Get a house in Weston. Within 40-50 years, there should be direct rapid transit to Union (15-20 mins).

 

[Tuscani01]

while i concur that the housing market is over-inflated, why is it necessary for you to immediately purchase something right after you graduate from university?

how much do/did you plan on putting down as a deposit?

it seems to me that many in their 20s-30s want everything their parents have NOW, without having to save and accumulate over time. it's the buy now and pay later attitude, and sense of entitlement.

without knowing what you're graduating from, are you aware that most graduates with bachelors degree earn mid-$30K in the beginning?
looking in the 600K range would still be 17x income.

Um, you do realize our parents were getting married at 19/20 and already owned a house and car at that point right? I purchased right out of university because it made sense. Mortgages have always been about buying now, pay later.

Now I must say, why a $600,000 home? Get a starter for much less. (ie. a condo)

 

[LordWanker]

Um, you do realize our parents were getting married at 19/20 and already owned a house and car at that point right? I purchased right out of university because it made sense. Mortgages have always been about buying now, pay later.

Now I must say, why a $600,000 home? Get a starter for much less. (ie. a condo)

The OP wanted to return to the neighborhood he grew up in, High Park. Nothing wrong with that except he is rather childishly naive with the area's current market values for houses.

 

[denfromoakvillemilton]

KingEast points out the major fallacy of waiting for a crash. The absolute value of housing is of less importance than your relative position. If you want to buy in a central location denfromoakvillemilton you need to leverage your assets. As a young man your assets are not money. The competition on a relative basis will utterly slaughter you in terms of income and financial assets when you are looking to buy. If you are dead set on a house over a condo (and I personally do not believe in owning condos) you need to know what your assets are. Your assets are flexiblity, time, determination, and risk-tolerance.

What that means is for you to enter the market you need to buy a crappy house in a marginal zone with potential and good bones and fix it up yourself over time while renting out part of it. If this sounds unappealing than you only have two options: win the lottery or buy a condo.

Thanks for the info.

 

[cdr108]

Um, you do realize our parents were getting married at 19/20 and already owned a house and car at that point right? I purchased right out of university because it made sense. Mortgages have always been about buying now, pay later.

Now I must say, why a $600,000 home? Get a starter for much less. (ie. a condo)

which reflects my comments ... nothing wrong with wanting to own per se, but the expectation of being able to buy a SFH (most likely detached since it's in HP) right out of university which is 17x one's expected income is somewhat unrealistic.

 

[js97]

which reflects my comments ... nothing wrong with wanting to own per se, but the expectation of being able to buy a SFH (most likely detached since it's in HP) right out of university which is 17x one's expected income is somewhat unrealistic.

Agreed. I have friends that are highflying jet-setter couples that can't come to grasp with the prices in those areas. Roncy/HP is definately not a 'starter' neighbourhood.

 

[ShonTron]

There's plenty of good, underpriced neighbourhoods, but it does mean looking outside the old City of Toronto. Regal Heights and Westmount in York (north of St. Clair between Bathurst and Caledonia), Cliffside in Scarborough, New Toronto/Alderwood in Etobicoke and much of East York are more affordable. East York and York have good transit connections. But they are becoming more popular.

Areas that are also quite affordable, but take, well, a higher tolerance level as they are not yet up-and-coming (and transit a longer ride), are Silverthorn and Mount Dennis (York), north Cliffside/Scarborough Junction, west Junction (beyond High Park Ave towards Jane, north of Annette), and the St. Clair East-Victoria Park-Dawes area. These are inter-war and post-war housing stocks, small houses, and not sought-after.

I don't really recommend buying into a barely-affordable shoebox condo. I think one can do well owning a condo as a primary residence long-term, but condo living could also end up being a trap of poor/incompetant management, bad neighbours, condo politics, heavy maintenance fees and difficulty selling.

Find a neighbourhood you like and rent a few years. No harm in that.

 

[Hipster Duck]

KingEast points out the major fallacy of waiting for a crash. The absolute value of housing is of less importance than your relative position. If you want to buy in a central location denfromoakvillemilton you need to leverage your assets. As a young man your assets are not money. The competition on a relative basis will utterly slaughter you in terms of income and financial assets when you are looking to buy. If you are dead set on a house over a condo (and I personally do not believe in owning condos) you need to know what your assets are. Your assets are flexiblity, time, determination, and risk-tolerance.

What that means is for you to enter the market you need to buy a crappy house in a marginal zone with potential and good bones and fix it up yourself over time while renting out part of it. If this sounds unappealing than you only have two options: win the lottery or buy a condo.

This is the best advice that anyone can give a new entrant to the housing market.

I would only add one thing: when it comes to housing market predictions - an imperfect science if there ever was one - we should listen to economists less and demographers more. You cannot predict how the Bank of Canada is going to set interest rates over the next 15 years, but you can predict, with a little more accuracy, where certain cohorts are going to wind up and what they're going to do with the homes they own.

Baby boomers might be holding on to larger, more central homes now (especially if they're asset rich and cash poor), but in 15 years many of them will simply be too old and infirm (and some of them even dead) to stay put and many will put their homes on the market. Just wait it out.

 

[scarberiankhatru]

Before getting into the "Kids these days get it all so easy and feel so entitled" attitude that is so eternally popular, it's worth knowing a little history: in the 1950s, it was entirely normal for a couple to buy a house just out of university. Same with veterans in their early 20s just returning from World War II. Governments had very elaborate policies to permit young people to buy new houses with little or no money down. House prices have increased far more rapidly than consumer price inflation and the median household income over the past decades.

That's over 60 years ago. People didn't even have colour TVs back then.

60 years ago? It was normal through the '70s to buy a house basically right after school. Maybe people rented for a year or two to save up a bundle, but owning a house at 25 was normal. Inner city real estate prices were deflated and suburban housing saw loads of small houses and townhouses getting built.

Developers' whims, lifestyle/decor trends, boomers rising rapidly through the workforce ranks, interest rates, Hong Kong money...all this and more combined in the '80s to change the norm. For a period, little housing was built other than 2000+ sq.ft pink brick monsters. By the time multi-attached housing and condos took over again in the '90s/'00s, there was still very little affordable housing getting built since it was all 'luxury' (air quotes, naturally).

A young person today simply does not have equivalent real estate options available to them that their parents or grandparents did. Unlike their grandparents, there's no cheap, new houses in central (by today's standards) areas like Don Mills. Unlike their parents, there's a rapidly diminishing number of rundown houses in good areas like the Annex that young people can invest in and improve over time (and an entire industry has sprouted to exploit undervalued real estate so there's more competition). But not everyone wants to move to Milton. Not everyone wants a 500 square foot condo. Not everyone wants to gamble that the stagnant patch of Scarborough, North York, Etobicoke, Mississauga, etc., that they're looking at has hit bottom and will get better in their lifetimes. Those are the realities most young people today are looking at when it comes to buying a house.

 

[Urban Shocker]

Shon Tron has identified a number of locations where young people could get into the housing market. I expect they're just as icky as Cabbagetown was 40 or 50 years ago - and therefore just as good opportunities. None of my former schoolmates bought houses at 25, right after school, in the 1970s, because rental housing was plentiful and cheap in those days and there wasn't the mad panic to buy that exists today.

 

[Urban Shocker]

Baby boomers might be holding on to larger, more central homes now (especially if they're asset rich and cash poor), but in 15 years many of them will simply be too old and infirm (and some of them even dead) to stay put and many will put their homes on the market. Just wait it out.

There's no point in young people circling like vultures for a chance to pick off those properties, because in 15 years time those centrally located homes will be worth even more than they are today.

 

[cdr108]

... Those are the realities most young people today are looking at when it comes to buying a house.

it's not a reality of the times, but an over-inflated housing market with values 35% above the norms.
if everything in TO was 35% less, then it would be affordable for the majority.
cheap money, loser credit standards, increased amortizations and further CMHC insurance eligibility have all contributed.

 

[Hipster Duck]

There's no point in young people circling like vultures for a chance to pick off those properties, because in 15 years time those centrally located homes will be worth even more than they are today.

But what drives demand, if not demographics? In 15 years the largest demographic group in history will be dumping houses en masse. Granted, this may have more repercussions on home values in suburban areas than in urban parts of town, but there will certainly be an effect on all markets.

 

[scarberiankhatru]

it's not a reality of the times, but an over-inflated housing market with values 35% above the norms.
if everything in TO was 35% less, then it would be affordable for the majority.
cheap money, loser credit standards, increased amortizations and further CMHC insurance eligibility have all contributed.

Yes, it is a reality of the times. An over-inflated housing bubble is both "real" and "now," hence, a reality of the times. It's not the only reality, though. We're not building the same housing stock that we did 30 years ago or 60 years ago, demographics are not the same, etc., etc.

But what drives demand, if not demographics? In 15 years the largest demographic group in history will be dumping houses en masse. Granted, this may have more repercussions on home values in suburban areas than in urban parts of town, but there will certainly be an effect on all markets.

What happens to the echo boomers now and for the next 15 years? Do they give up on a good house in Toronto and buy a cheaper, equivalently-sized house in Milton or Oshawa [or Malvern]? Do they buy a condo? Do they rent? Are they even getting married and having kids and wanting a house? Could these dumped houses in decent neighbourhoods still be beyond their reach after 15 years?

Thinking about it for a second, boomers' ages are spread out enough that the cohort's crossing of the 'giving up the house' threshold will not be a sudden event...it will probably happen over a 20+ year period and could be a small enough force each year to not cause a big blip in the real estate markets.