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MaynardKrebs
Heave Steve, for the good of the country
Premium
join:2009-06-17
kudos:4
reply to AR

Re: [Rant] House prices in Toronto

said by AR:

My friends (lawyer and psychiatrist) are looking in the Beaches and Forest Hill.

I predict a 1.5M purchase price.

I predict higher than that.


AR
Premium,ExMod 2001-04
join:2000-09-21
Toronto, ON
reply to donoreo

Dude...1M is a SHIATLOAD of money.

Even if you put down 50%, the mortgage will be 500,000.

Have you looked at the amortization table for a 500k mortgage? Here's a calculator....the interest payable on that is a giganormous amount!!!

»www.bankrate.com/calculators/mor···tor.aspx

What's wrong with a 700k home in Richmond Hill? Up on Bayview somewhere?



AR
Premium,ExMod 2001-04
join:2000-09-21
Toronto, ON
reply to MaynardKrebs

They bought a 43,000 Honda Accord but I'll give them more credit for their intelligence than to buy a home over 1.5M even if she's a Doctor.



Wolfie00
My dog is an elitist
Premium
join:2005-03-12
kudos:8

So putting $1.5M into a house that they might sell in ten years for $6M shows a lack of intelligence? Or even if they sell for less than that, living in a nice home for many years and then having all the costs returned to them plus a likely hefty profit when they sell is somehow a problem? It's only a problem if they can't afford it and/or the interest is going to kill them.
--
"We must change our lives so that it will be possible to live by the assumption that what is good for the world will be good for us. And that requires that we make the effort to know the world and learn what is good for it."
Wendell Berry



AR
Premium,ExMod 2001-04
join:2000-09-21
Toronto, ON

Assumptions:

a. 1.5M home will appreciate to 6M.
b. Level of income will be maintained/increase.
c. Maternity leave of 2 years that the higher earning parent will have to take when she's off for 2 years of her pregnancy leave. Guy ran out of cash on his 140k salary when she transitioned from resident to Doctor and wasn't working for 3 months. How's he going to support a mortgage on his 1.5M when for 10 years he still hasn't paid off his law school debt.
d. Illness, job losses, life changes etc

I call this over-optimistic, simplistic financial planning. It's always better to live below one's means.



Wolfie00
My dog is an elitist
Premium
join:2005-03-12
kudos:8

I completely agree, AR. Hence my last sentence. A house can be about as close as you can ever come to a no-lose proposition provided that you have all your ducks in a row. A greedy idiot can lose his shirt on real estate just as easily as he can on anything else.



AR
Premium,ExMod 2001-04
join:2000-09-21
Toronto, ON

yeah...but keep in mind that this is a 500k/year income household. When I can foresee a tight financial future for them with a 1.5M purchase, how the hell is a 200k household buying a 800k home in Stouffville?


MaynardKrebs
Heave Steve, for the good of the country
Premium
join:2009-06-17
kudos:4

A friend told me that nice homes in Sydney, NS go for $250-300K.
They need lawyers & shrinks there.......and if they bought there they'd have enough money left over for a pair of his/hers snowblowers



TOPDAWG
Premium
join:2005-04-27
Midland, ON
kudos:3
Reviews:
·TekSavvy DSL
reply to donoreo

The big issue about not picking a home and waiting is the prices will just keep going up. While your wife may not find her dream home and good luck doing that you could find a great home fix it up to your needs and be happy. Now that house that would be great and just needed a few fix-ups may cost even more and not be upgraded at all.

Home prices in TO are going up so fast it forking nuts. Hell even in barrie the prices are getting out of control.


booj

join:2011-02-07
Richmond, ON

said by TOPDAWG:

The big issue about not picking a home and waiting is the prices will just keep going up. While your wife may not find her dream home and good luck doing that you could find a great home fix it up to your needs and be happy. Now that house that would be great and just needed a few fix-ups may cost even more and not be upgraded at all.

Home prices in TO are going up so fast it forking nuts. Hell even in barrie the prices are getting out of control.

Why would prices keep going up? They did in the US for a decade, to levels we see now in Canada, but in the last five years they've been tanking.

It's a fantasy to think that the price trends we've seen in Canada will continue. They won't.


EUS
Kill cancer
Premium
join:2002-09-10
canada
reply to Wolfie00

If 1.5M turns into 6M, I wonder at what level salaries will be at, and how much will 2 liters of milk will cost?
--
~ Project Hope ~



A Lurker
that's Ms Lurker btw
Premium
join:2007-10-27
Wellington N

said by EUS:

If 1.5M turns into 6M, I wonder at what level salaries will be at, and how much will 2 liters of milk will cost?

It will depend. Going from 1.5 to 6M might be a stretch, but you never know. I purchased about 15 years ago and the house is more than doubled, but not quite tripled in value. I've changed careers since then, however, my income is probably double what it was when I purchased.

I remember talking to a relative about purchasing homes (they were involved in real estate for about 30 years). When they originally purchased their first home they bought something double the value of the husband's annual salary. They did look at something three times that number, but decided it was out of their range (although technically they would have qualified for a mortgage). That bought them a brand new, small 2-storey 4 bedroom home in a nice area (unfinished basement, no air, no fence, no garage, unpaved driveway, etc.) The second income in the family was extras. In fact, paid for the air, finished basement, fencing, vacations, etc.

That's part of what has changed over the years. Picking a number out of thin air, let's say you're making 60K in Burlington (where I live). There are two condo properties under 125K, 9 more added if I go to 175K. Hamilton, I do see plenty (areas I'm not so sure about). In most markets today you have to base that purchase on both incomes. Burlington is still a little pricey, but tons more choices.

The other part that has changed is the houses that they build. Square footage is higher, most have a garage, fireplaces, etc. New homes have gone higher end. Resales already have the bells and whistles installed. This makes it higher for first time buyers to get in. They have to go condo or townhouse, but they don't want to. They want what their parents had (or grandparents depending on ages) right out of the gate. The catch is that they didn't have that to start with.

PX Eliezer7
Premium
join:2008-08-09
Hutt River
kudos:13
Reviews:
·callwithus
·voip.ms
reply to AR

said by AR:

I call this over-optimistic, simplistic financial planning. It's always better to live below one's means.

Right.

Failing to heed that advice is what got my country into trouble.


EUS
Kill cancer
Premium
join:2002-09-10
canada
Reviews:
·voip.ms
reply to A Lurker

Doubling happens, but quadrupling in a decade would mean something is really amiss.
I live in the west island of Montreal (Pointe Claire). The market doesn't make sense anymore.
The flipping I'm seeing reminds me of the USA in 2006.
But as long as interest stays low, and people only concern themselves with monthly payments, the bubble will not burst.
I'm almost mortgage free, and cannot imagine buying something at the prices I'm seeing today.
However, thanks to all the HGTV shows (yes, I'm blaming TV), the wife is insisting that we look for an upgrade. Personally, I believe she's trying to cause a brain aneurism, and collect the life insurance.
--
~ Project Hope ~



A Lurker
that's Ms Lurker btw
Premium
join:2007-10-27
Wellington N

said by EUS:

But as long as interest stays low, and people only concern themselves with monthly payments, the bubble will not burst.

I think some markets are almost at the tipping point. They may not correct, but they will slow.

said by EUS:

Personally, I believe she's trying to cause a brain aneurism, and collect the life insurance.

As long as she hasn't increased the amount that it pays out recently you're probably okay.

I do think a lot of the media is what drives people to live beyond their means at times. If you watch all the shows it's no longer a patio with a cheap table and chairs, it's an outdoor entertaining space.

(full disclosure - I have a bricked patio with a very nice patio set, but I bricked it myself, and the patio set was paid for years ago with a tax refund, and it did have a 10-yr warranty )


AR
Premium,ExMod 2001-04
join:2000-09-21
Toronto, ON
reply to EUS

People here are buying 3 homes at the same time in Milton --- 2 to flip and 1 to live in. And driving an Audi at the same time.

So I don't know how people have so much money.

Wtf am i doing wrong?



EUS
Kill cancer
Premium
join:2002-09-10
canada
Reviews:
·voip.ms

We're both doing fine in our careers, but we ask ourselves how the @#$% does so many people appear to have so much money?

It's gotta be old money, grow ops, or heavy credit.
--
~ Project Hope ~



nitzguy
Premium
join:2002-07-11
Sudbury, ON
reply to AR

said by AR:

People here are buying 3 homes at the same time in Milton --- 2 to flip and 1 to live in. And driving an Audi at the same time.

So I don't know how people have so much money.

Wtf am i doing wrong?

Like EUS said, old money...some old person who paid probably $100k for their house in the 1970s is turning around and realizing a HUGE profit on that house that sells for avg $500k (lets say for fun sakes)...

That's $500k of cold hard cash as their parents were frugal and they died and left everything to Junior....

Then using that to leverage to buy the new house....that's the only way I can see it either...because you just can't generate that kind of money otherwise....not out of 2 people who combined make $200k/yr..

But that's the secret, once you get to a 20% down payment, banks seem to have uber flexibility in regards to rates, amortizations and whatnot since it doesn't have to go through CMHC/High Ratio financing place that would scrutinize the purchase a lot more....


AR
Premium,ExMod 2001-04
join:2000-09-21
Toronto, ON

But some of the stories i heard yesterday:

a. 28 year old, newly minted Real Estate lawyer buys 3 homes in Milton - 2 to flip and 1 to live in. Drives a new Audi too. Parents have still got to be alive because he's 28. So where's the cash?

b. Old 50-something guy, SAP consultant for IBM buys a 900k home in Mississauga. Single earner for the family.

c. At my work -- this particular individual with a combined income of approximately 250k tops moves from Vanc and buys a 1.6M PALACE in Pickering. We got to see their finances (long story) and whereas they had 800k in RRSPs, RESPs and savings, 1.6M is a lot of money!

So where's the money coming from!! How are these people taking this kinda debt on themselves?


booj

join:2011-02-07
Richmond, ON

1 edit

How? Low mortgage rates, plus giant CMHC premiums that place the risk of default on the taxpayer.

Rules are changing to end easy CMHC insurance. Banks are going to stop giving away houses for low monthly cost and real estate price decline will begin.

Not a good time to speculate on housing prices with these new rules. 2006 was.



elwoodblues
Elwood Blues
Premium
join:2006-08-30
Somewhere in
kudos:2
Reviews:
·VMedia

said by booj:

How? Low mortgage rates, plus giant CMHremiums that place the risk of default on the taxpayer.

Rules are changing to end easy CMHC insurance. Banks are going to stop giving away houses for low monthly cost and real estate price decline will begin.

Not a good time to speculate on housing prices with these new rules. 2006 was.

And who created those rules in 2006... OH yes "The Harper Government", so now they have to step back fix the mess they created.

IIRC correctly the taxpayer pays off the bank, but CHMC still comes looking for the money from the mortgagee.
--
No, I didn't. Honest... I ran out of gas. I... I had a flat tire. I didn't have enough money for cab fare. My tux didn't come back from the cleaners. An old friend came in from out of town. Someone stole my car. There was an earthquake.......


A Lurker
that's Ms Lurker btw
Premium
join:2007-10-27
Wellington N

1 edit
reply to AR

said by AR:

People here are buying 3 homes at the same time in Milton --- 2 to flip and 1 to live in. And driving an Audi at the same time.

Can't speak to individuals, but an old friend used to flip. It's a talent (people who are good at it). Identify an underpriced house in a neighbourhood, do minimal clean-up, resell. I got to say his methods were a tad sleazy and he worked with a realtor. Best homes to flip are in established neighbourhoods with long term residents who suddenly need to sell. Think death in the family. A neighbour's husband passed away a couple of years ago and her home was a perfect flip. Think old faded wallpaper and linoleum. Really just needed a big clean-up, and a small amount of cosmetic repairs. However, it showed badly - worn furnishings as well (too much of it made rooms look smaller as well). Sold for at least 100K less than comparables (likely closer to 150K). I had enough equity I considered doing it myself. I suggested she pay someone to do the changes so she could get more. Happily the person who bought it did the renos and stayed.

said by AR:

Wtf am i doing wrong?

When did you first start thinking about buying property? How much time has passed? You keep talking about buying after the bubble bursts, but meanwhile prices keep going up. I think once I even looked up and suggested resale condos for you in the area you were interested in. I'm not sure how far back that was, but I bet properties in the same buildings have appreciated since then.

You need to start somewhere, build equity, and keep going. Of course it likely means spending less on other things. I think you mentioned once that you didn't cook much. You need to track where your money goes, and if that's where you want it to go.

I've helped a couple of friends with money management. I'm absolutely no expert, but the first step is to know exactly where you currently spend your money. I worked with one guy who was always broke, and eating out was his killer. Coffee and breakfast on the way in, lunch out, coffee run in the afternoon - they added up to more a week than even he thought.


A Lurker
that's Ms Lurker btw
Premium
join:2007-10-27
Wellington N

Okay, since I'm bored:

(from Dec 2010) - »Re: [Serious] Real estate in Toronto

289,000 (1 BR, 1 BA) 38 THE ESPLANADE ST (guessing 11th floor)
- I removed the link as it's no longer valid

Today....
324,900 (1BR, 1BA) 38 THE ESPLANADE ST (guessing 14th floor)
»www.realtor.ca/propertyDetails.a···11852544

12% increase in value in less than 2 years (and you wouldn't have been paying rent). I know, I believe that was slightly above your range - I did give you a cheaper alternative, but there isn't a unit for sale in that building.



AR
Premium,ExMod 2001-04
join:2000-09-21
Toronto, ON

Back in Dec 2010 and now in Aug 2012 --- I'm still priced out of the RE market if i consider the increase in housing cost by means of ownership versus the rent I pay. I do not want to end up house poor or struggling to make mortgage payments.

Rent for the $330,000(600 sq ft at $600 per sq ft) 1br condo I pay: 1250. Mortgage/insurance/maintenance --- well, you know it's going to be much more than 1250. Long term equity benefit is doubtful.

But I do put aside 20% in my RRSP and another 5% of my gross income as savings.



TOPDAWG
Premium
join:2005-04-27
Midland, ON
kudos:3
Reviews:
·TekSavvy DSL

said by AR:

Back in Dec 2010 and now in Aug 2012 --- I'm still priced out of the RE market if i consider the increase in housing cost by means of ownership versus the rent I pay. I do not want to end up house poor or struggling to make mortgage payments.

Rent for the $330,000(600 sq ft at $600 per sq ft) 1br condo I pay: 1250. Mortgage/insurance/maintenance --- well, you know it's going to be much more than 1250. Long term equity benefit is doubtful.

But I do put aside 20% in my RRSP and another 5% of my gross income as savings.

well once you're ready to retire you can move to a much cheaper place to live. shit long as where you live has a walmart you'll have everything you ever need.


A Lurker
that's Ms Lurker btw
Premium
join:2007-10-27
Wellington N

1 edit
reply to AR

I did another response, but I guess I didn't hit post. The thing is, you're paying the guy's mortgage on the condo while he builds equity. You end up just paying rent. Anyway, in the end it's up to you. However, it's not likely going to get better. It may not be in an area you want to live in, but here's a development (new) in the low 200s.

»www.realtor.ca/propertyDetails.a···62810362
»www.realtor.ca/propertyDetails.a···45833858
»www.realtor.ca/propertyDetails.a···67073995

There's not a huge amount of choice if you stick under 250K, but there still are some.

Oh, and from that original post I made, I found the studios at 1 King West (there are a few more up for sale). Was 197,500 then... now, two up for sale:

219,000
»www.realtor.ca/propertyDetails.a···66806023

223,000
»www.realtor.ca/propertyDetails.a···66806023

So, that 197,500 investment would have brought you a better return. In the end, it's up to you. You rent or you own.

ETA - because of location and the hotel services to my mind the 1 King West condo fees are too high, but it was the other one I had picked.


Wolfie00
My dog is an elitist
Premium
join:2005-03-12
kudos:8
reply to AR

I honestly think you're cheating yourself, AR, but I admit that I know nothing about the condo market, which is a very specialized area.

But look at some numbers and how I've always experienced them in the housing market.

Take for the sake of argument a $300K house, $100K down, amortization of 20 years, closed 5-year variable @ 3.2%

You'd be paying $1129.33 (or $969.36 for a 25-year) and that's pretty much fixed, varying only with interest rates. Plus taxes and maybe condo fees.

Hard to imagine that you could get that same place for a rent of just $1000, since the landlord has all the same expenses you would, but I imagine if the owner bought it a long time ago and the rental market was weak he'd let it go at that. But even so if the rent was going up 5% a year, you'd be paying $1629 by the beginning of the tenth year, and have absolutely nothing to show for all that money spent. The classic thing about a mortgage is that it's not affected by a rise in property values, so you get established owners paying a pittance in mortgage for a house that would rent for ten times that amount. Owning, you are building equity, have the freedom to do what you like with the place, and are very likely going to be benefitting from appreciation.

I realize that financial wizards can spin the numbers to make it look like renting is far superior, yet my own personal experience is that this is an example of where intuition is actually right.
--
"We must change our lives so that it will be possible to live by the assumption that what is good for the world will be good for us. And that requires that we make the effort to know the world and learn what is good for it."
Wendell Berry



elwoodblues
Elwood Blues
Premium
join:2006-08-30
Somewhere in
kudos:2
Reviews:
·VMedia

I'm not a fan of condos, strictly because of the fees. A buddy of mine is paint nearly $500/month for a 700 square ft unit, it includes hydro and water gym, pool BBQ on the roof.

He never uses the latter 3, heat/air con are in his unit, thus his responsibility, I don't think I've ever spent 500/month to live in my house (capital/repair costs aside).
--
No, I didn't. Honest... I ran out of gas. I... I had a flat tire. I didn't have enough money for cab fare. My tux didn't come back from the cleaners. An old friend came in from out of town. Someone stole my car. There was an earthquake.......



Wolfie00
My dog is an elitist
Premium
join:2005-03-12
kudos:8

Yep, condo fees can be killers.



milnoc

join:2001-03-05
H3B
kudos:2

One of the reasons I sold my condo years ago was because of the increasing condo fees, taxes and interest payments. It was costing me as much as rent.

I sold it just as the market peaked for more than double what I paid for it.
--
Watch my future television channel's public test broadcast!
»thecanadianpublic.com/live