The Housing Market needs to crash.

[BobTheCat]

I must admit, reading all these posts brings back memories of real estate
bubbles in the past. My wife and I lived in California ( San Francisco ) during
the 80's & 90's and in NY from 2000 - 2008. The pattern is amazingly similar
to whats taking place now in Toronto.

The cost of a SFH is now pretty close (if not past) the maximum income level that
two successful people earning a good salary can support. Take every dime
they have available and amortize it at the lowest interest rates in history
and you get the price of a house ! With barely enough for a pint at the
pub left

Right about now, all those folks that purchased $1M bungalows start reading
posts like these and articles about the economy... They start to think, hey
this might impact me ! Then may postpone the purchase of the new car, the
new plasma or the new iPad. This tends to slow the economy more, which
is reflected in business slow downs, which is reflected in the press
... like the GM plant closure.. ( rinse and repeat ) It builds on itself.

It's no different here. Just another property bubble like everywhere else, it's
just the Canada came late to the party... And here I was hoping we wouldn't
follow the rest of the world off the same cliff Greed.... ugh. The funny thing
is the only ones booking the profits are the REALTORS, with fat commissions,
the BANKS, with interest and fees, the CITY, with taxes taxes taxes...

The crazy thing is that when it does crash, those of you who live within your
means will carry the debt ( bailout ) for those who borrowed recklessly. For that
we can thank our finance minister, who, like a bartender, keeps pouring drinks
while occasionally warning the drunkards not to drink too much.

 

[James]

Toronto is a big city. Get used to it.

Like most big cities, single family houses in Toronto are extremely expensive because they are in short supply. People will have to get used to living in condos like other big cities, and that includes families with children. Our congested highway system cannot accommodate any more people commuting 1 hour each way in heavy rush hour traffic to and from distant suburbs.

Unless you are wealthy, you can't expect to able to afford a house close to your work in most parts of the GTA, in a decent neighbourhood. This includes not only houses near downtown, but many of the more desirable parts of the 905 such as Markham are also very expensive.

This is true and people do have to recognize this. I don't think it's reasonable for a first-time home buyer or a family with an average household income to be able to afford a detached home anywhere off Yonge Street, from Bloor up to the 401. Now I also don't think it should be reasonable that they would be able to. Given the number of people in the city, the number of successful professionals, the number of old moneyed families, the number of wealthy entrepreneurs, the number of high-profile individuals, the number of wealthy immigrants...it certainly makes sense that the tried-and-true sought-after enclaves will simply continue to command higher and higher property values. As neighborhoods gentrify outwards, the "cost of entry" increases accordingly. So much so, that neighborhoods up in Vaughan, Richmond Hill and Markham in effect have been steadily going up in demand. As noted above, Toronto is a big city. We have to accept it.

 

[figaro]

^
I am glad people are realizing that it is not so much a bubble but their expectation towards what lifestyle they can afford should change.

Toronto is experiencing a big change, transforming into a higher ranked city I would say in a matter of few years. Those who still think they SHOULD be able to afford to buy a 2000sf single family house just outside the city core with single income by the age of 35 should think again. BIG CITIES ARE NOT AFFORDABLE, PERIOD, and there is nothing you can do about. Visit New York, London and Paris, even San Fran, average families can't buy a detached house close to the city either. sure, Toronto is not New York and London, but we are no where near that expensive either. Average Parisian makes no more than Torontonians, but their housing price is triple ours. Economics doesn't work here, and don't expect it to.

Less wealthy families in the coming years will have to accept the fact that unless you want to commute 2 hours each way everyday, you will have to deal with condos. New immigrants will keep pushing housing prices for sure. A 1200 sf condo in Beijing or Shanghai nowadays is worth $500-$800K, and selling those condos for a house in Toronto with a private yard seems a steal, and they will keep doing it. Supply will remain scarce and there is noway to get around it.

We have been talking about a crash a housing market for how long, a decade? Real estate is cyclical and will experience ups and downs for sure. But those who expect a major decline in price just because it is increasingly unaffordable for average family to buy a single family house will end up hugely disappointed. Single family house living will eventually become a luxury lifestyle only available to the wealthy, much like it is in major cities outside North America. Don't like condos? That's probably what you can afford.

 

[figaro]

Only $1.25 a litre?

I'd have thought that milk would generally be more expensive than oil.

But hey, if you want them to cut more corners to make the milk cheaper, go ahead. I'll stick to organic.

He is probably talking about 2L.
Every week I buy 2L of milk for $6.19. Canadians seem to think this price is normal.

 

[CN Tower]

I must admit, reading all these posts brings back memories of real estate
bubbles in the past. My wife and I lived in California ( San Francisco ) during
the 80's & 90's and in NY from 2000 - 2008. The pattern is amazingly similar
to whats taking place now in Toronto.

The cost of a SFH is now pretty close (if not past) the maximum income level that
two successful people earning a good salary can support. Take every dime
they have available and amortize it at the lowest interest rates in history
and you get the price of a house ! With barely enough for a pint at the
pub left

Right about now, all those folks that purchased $1M bungalows start reading
posts like these and articles about the economy... They start to think, hey
this might impact me ! Then may postpone the purchase of the new car, the
new plasma or the new iPad. This tends to slow the economy more, which
is reflected in business slow downs, which is reflected in the press
... like the GM plant closure.. ( rinse and repeat ) It builds on itself.

It's no different here. Just another property bubble like everywhere else, it's
just the Canada came late to the party... And here I was hoping we wouldn't
follow the rest of the world off the same cliff Greed.... ugh. The funny thing
is the only ones booking the profits are the REALTORS, with fat commissions,
the BANKS, with interest and fees, the CITY, with taxes taxes taxes...

The crazy thing is that when it does crash, those of you who live within your
means will carry the debt ( bailout ) for those who borrowed recklessly. For that
we can thank our finance minister, who, like a bartender, keeps pouring drinks
while occasionally warning the drunkards not to drink too much.

Nonsense.

"California in the 90's"
"New York in the 00's"
"Miami"
"Vegas"
"Arizona"

Guess what? During all those real estate booms Toronto didn't just sit this one out- we rose along with everyone else! Just not at same pace but upwards nevertheless. So the continued upward growth in home prices should come as no surprise to anyone who has actually lived and owned property in this city for decades. The current housing cycle started in 1996! That's 16 years of steady growth after a major price correction following a huge overbuilding cycle.

http://www.mississauga4sale.com/last-real-estate-recesssion-GTA-Toronto.jpg


We may be overshooting real demand (vs investor) in the condo cycle a bit but this time the banks will reign in the excess and there will be a period of absorption followed by more growth.

Jobs & population growth will keep things moving. If either of those reverse the situation will change.

 

[andrewpmk]

I must admit, reading all these posts brings back memories of real estate
bubbles in the past. My wife and I lived in California ( San Francisco ) during
the 80's & 90's and in NY from 2000 - 2008. The pattern is amazingly similar
to whats taking place now in Toronto.

The cost of a SFH is now pretty close (if not past) the maximum income level that
two successful people earning a good salary can support. Take every dime
they have available and amortize it at the lowest interest rates in history
and you get the price of a house ! With barely enough for a pint at the
pub left

Right about now, all those folks that purchased $1M bungalows start reading
posts like these and articles about the economy... They start to think, hey
this might impact me ! Then may postpone the purchase of the new car, the
new plasma or the new iPad. This tends to slow the economy more, which
is reflected in business slow downs, which is reflected in the press
... like the GM plant closure.. ( rinse and repeat ) It builds on itself.

It's no different here. Just another property bubble like everywhere else, it's
just the Canada came late to the party... And here I was hoping we wouldn't
follow the rest of the world off the same cliff Greed.... ugh. The funny thing
is the only ones booking the profits are the REALTORS, with fat commissions,
the BANKS, with interest and fees, the CITY, with taxes taxes taxes...

The crazy thing is that when it does crash, those of you who live within your
means will carry the debt ( bailout ) for those who borrowed recklessly. For that
we can thank our finance minister, who, like a bartender, keeps pouring drinks
while occasionally warning the drunkards not to drink too much.

The condo is the new starter house and I think you will find that once you get outside the outrageously expensive downtown Toronto market, condos become affordable pretty rapidly. There are many condos under construction in the outer 416 and 905 and these are generally pretty cheap. For people who work in the suburbs (a large majority now), there are many affordable condos to choose from. In contrast because of the greenbelt, single family houses in the GTA in decent neighbourhoods are extremely expensive unless you go very, very far out (think Burlington, Newmarket, Pickering), and townhouses are much cheaper than single family houses but still expensive. You cannot get a decent single family house in the GTA for under $500K these days in most areas, including 905 suburbs with large amounts of employment like Mississauga, Markham, Richmond Hill etc.; most people cannot afford that and will end up living in condos. You can pay over $400K even in bad neighbourhoods (e.g. Derry/Mavis - lower income part of Mississauga with big warning signs everywhere warning about high levels of airport noise - many jobs near here but not a desirable area). In contrast you can get a nice 2 bedroom condo near Square One for under $300,000. Like every other big city (e.g. NYC, London, Paris, etc.) families living in condos is becoming normal, including in the suburbs.

 

[cdr108]

He is probably talking about 2L.
Every week I buy 2L of milk for $6.19. Canadians seem to think this price is normal.

you can buy 4L bags for that price at virtually every grocery store, unless you're talking about the corner store which grossly overprices their items.

4L organic milk goes for $8-11

 

[jeff316]

single family houses in the GTA in decent neighbourhoods are extremely expensive unless you go very, very far out (think Burlington, Newmarket, Pickering), and townhouses are much cheaper than single family houses but still expensive. You cannot get a decent single family house in the GTA for under $500K these days in most areas, including 905 suburbs with large amounts of employment like Mississauga, Markham, Richmond Hill etc.; most people cannot afford that and will end up living in condos.s.

Agreed - suburbs are deceptively expensive. You pretty much can't find a three-bedroom detached house under 375 000$ in Burlington, Oakville, Mississauga, most of York Region and the megacity - other than some isolated houses in Weston two pockets in Scarborough. Yeah, 375 and deatched are subjective criteria, but that's a huge georgaphic area - essentially from the Skyway Bridge through to about Liverpool Road in the east, with the northern limits being the 407 going east up to the 401 until you hit Newmarket. It's more than 2400 square kilometres.

What I don't understand is how condo living will alleviate the family problem. There are few family-sized condos available. And the few options that exist aren't much cheaper than the too-expensive housing. I guess if the price delcine hits condos the hardest, there may be some price softening that make family-sized condos more affordable...

 

[BobBob]

What I don't understand is how condo living will alleviate the family problem. There are few family-sized condos available. And the few options that exist aren't much cheaper than the too-expensive housing.

I think one of the things which will have to change slightly is our definition of "family-sized". A decently laid out 2-bedroom apartment is perfectly "family-sized" in many urban areas of the world. And we actually have lots of those.

 

[Lenser]

Spot on. Our idea of what constitutes "family sized" will evolve into something significantly smaller... just as the notion of "personal space" must also shrink. In our cities, it's inevitable.

 

[figaro]

I think one of the things which will have to change slightly is our definition of "family-sized". A decently laid out 2-bedroom apartment is perfectly "family-sized" in many urban areas of the world. And we actually have lots of those.

Exactly.
In Japan, 600sf two bedrooms are everywhere, and they are considered "family sized". I am not proposing that kind of "compact" but the space most Canadians have is extravagant by world standards.

The normal concept of family sized space is largely outdated. Try two kids sharing a bedroom until they are 18 and move out; try combining the function of livingroom, familyroom and diningroom in one room, try a kitchen just big enough for cooking, not dancing; try buying fewer cookware and only keeping those you actually use for more than 5 times a year. Try not to have a guest suite and whover visits sleeps on the couch.

The you end up not having to drive 60 minutes out of the city to find a home, and you kids probably will stop bugging you for a car.

 

[figaro]

Agreed - suburbs are deceptively expensive. You pretty much can't find a three-bedroom detached house under 375 000$ in Burlington, Oakville, Mississauga, most of York Region and the megacity - other than some isolated houses in Weston two pockets in Scarborough. Yeah, 375 and deatched are subjective criteria, but that's a huge georgaphic area - essentially from the Skyway Bridge through to about Liverpool Road in the east, with the northern limits being the 407 going east up to the 401 until you hit Newmarket. It's more than 2400 square kilometres.

What I don't understand is how condo living will alleviate the family problem. There are few family-sized condos available. And the few options that exist aren't much cheaper than the too-expensive housing. I guess if the price delcine hits condos the hardest, there may be some price softening that make family-sized condos more affordable...

dude, when someone doesn't make a LOT of money, why does he think he is entitled to a "detached"? what's wrong with sharing walls with neighbours.

Try to accept the fact that in Toronto, DETACHED homes are for the rich people. It is not average working people should expect to own, much like when you make $60K a year you don't expect to fly business or first class when travelling. Detached houses (or even semi-detached) are a luxury and not a nececity. The earlier we accept that, the less painful it will be.

 

[andrewpmk]

Out in the suburbs you can get a 1000sqft condo for cheap, which is perfectly adequate for a family with kids. On the other hand in the better suburbs like Markham or Oakville a townhouse (often a condo townhouse since these are cheaper than freehold) costs 400K and a detached house costs 500K+ even in the more middle class parts of these suburbs. Upper middle class people may be able to afford a townhouse because it occupies much less land than a single family house, but detached houses are for the rich only even in the suburbs. Middle class people cannot afford a house in the suburbs anymore unless they commute 1 hour plus in bad traffic each way or live in bad neighbourhoods, and this applies to people who work in the 905 as well.

 

[nfitz]

Every week I buy 2L of milk for $6.19. Canadians seem to think this price is normal.

Where do you buy milk for $6.19 for 2L? I pay about that for 4 L of organic.

 

[figaro]

Where do you buy milk for $6.19 for 2L? I pay about that for 4 L of organic.

Metro - the only one within walking distance.
I need the lactose free products though, which is more expensive.