BOC Hits 5%

[nobbie48]

This exactly the agent usually talks down the seller telling them it isn't worth much then they or a buddy buy it.

Sent from the future

If the seller hasn't been in the market for half century and they're told the $20 K property they bought is worth a million they could jump at it.

A friend lost out big time when the family home got sold. The executor lived in Boonyville and jumped at a million, selling the property, thinking she had hooked a sucker.

The property got flipped a couple of times before the house got knocked down and a mega shack built. The lot was close to two million.

My B-I-L was shopping for a cheap set of wheels and got talking to an older gent that had a 10-12 year old, well cared for, low mileage CRV. The old guy complained that he was going to buy a new one but the dealership was only going to give him $50 for his. B-I-L offered him a lot better than the dealer's slap in the face and got the car.

If a person has a target area and house style they could use the same logic. Fair price, as is, no real estate, open to closing dates, flexible financing options. Of course if real estate gets wind of the deal there will be promises of bidding wars over the moon.

 

[GreyGhost]

My B-I-L was shopping for a cheap set of wheels and got talking to an older gent that had a 10-12 year old, well cared for, low mileage CRV. The old guy complained that he was going to buy a new one but the dealership was only going to give him $50 for his. B-I-L offered him a lot better than the dealer's slap in the face and got the car.

One of my wifes old vehicles was traded in by some old people that were worried about the price of fuel as it was thirsty. They put 15,000 km on in five years and took an almost $40K depreciation hit to move into a more fuel efficient vehicle. Ouch. She put 200K km more on it in less than four years. Man was it thirsty. We probably should have bought something else but she loved it.

 

[Dresden]

1) Get rid of credit cards, loans on cars and toys.
2) Get better jobs -- $1M appetite needs a combined income of about $200K
3) Lower expectations -- many first-time buyers enter the market at far less than 'average' by either looking for a place that needs some attention or isn't in a geographic sweetspot.
4) Move. Thunder Bay, Calgary, Regina, Moncton (and lot of other places) all have great employment opportunities, excellent pay and much lower house prices.

There really isn't any magic. 25 years ago the average price for a house was $229,635 in Toronto. Interest rates were $13%, and the average family income was $57,800 -- that income would only support borrowing 45% of the average home's value. It has become worse in the last 3 years, an average income only finances 32% of the average home's price, but real estate values do go up and down, so maybe that will change.

Either way, the average family income in Toronto hasn't financed the average family home for decades.



-

That $229,635 house took $45K down to buy - land transfer costs were $10K and so were realtor costs for the seller. The average couple earning a merger $57,800 back then could save that inside of 2-3 years with their first jobs out of University.

Today you need a minimum of $200,000 for the same home and $100K incomes each (closer to $300K including the land transfer costs). Realtor fees for the seller are $50K on a million dollar home for doing the same work they did 25 years ago for $10K.


I love Boomer logic.

Hey, I'm a home owner too but let's be real here LOL.

 

[crankcall]

There is no easy way to say it . It’s really hard .
My dog sitter ( that’s how I know him, he’s is a frieght broker) wanted in the market . He’s 28 , makes about 150k and to buy a condo near high park was $750k , with some grandma money , dad money and some creative finance he is in. But he dog sits for me to help make ends meet . It’s really hard .


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[Mad Mike]

That $229,635 house took $45K down to buy - land transfer costs were $10K and so were realtor costs for the seller. The average couple earning a merger $57,800 back then could save that inside of 2-3 years with their first jobs out of University.

Do you think? If you made $57K, you probably brought home $36K. Perhaps you could save that much if you lived with Mom and dad and they paid for your rent, car, student loans, and food. If you rented a lousy 2br apartment near beautiful Warden and Finch, your rent would have been $14,000 a year.

But I think you missed the main point -- 25 years ago the average income would only finance a $100K mortgage -- so with that income you weren't buying a $229K average house in Toronto. You were looking in Hamilton, Oshawa, Keswick for a rough starter. Also remember back then those were a lot tougher commutes -- no GO, and from the North no highways.

I love Boomer logic.

I'm not a boomer, but I can't fault their logic. The ones I know got in through sacrifice, scrimping, saving under conditions that don't appear to be any less challenging for them.

My kids are in their 20s, they have a few friends that managed to get into houses -- those friends (and my kids) have no pictures of them climbing Machu Pichu, or Barefoot cruising through the Carribean, VWs instead of BMWs.

Boomers I know do have pictures of them climbing Machu Pichu, and sailing Barefoot cruising through the Carribean, .BMWs, and URALs - but they have less hair and it's grey. They chose to have fun in their last 40 years, at the expense of their first 10.

Boomer Logic seems to be working for a lot of them.

 

[Dresden]

Do you think? If you made $57K, you probably brought home $36K. Perhaps you could save that much if you lived with Mom and dad and they paid for your rent, car, student loans, and food. If you rented a lousy 2br apartment near beautiful Warden and Finch, your rent would have been $14,000 a year.

But I think you missed the main point -- 25 years ago the average income would only finance a $100K mortgage -- so with that income you weren't buying a $229K average house in Toronto. You were looking in Hamilton, Oshawa, Keswick for a rough starter. Also remember back then those were a lot tougher commutes -- no GO, and from the North no highways.


I'm not a boomer, but I can't fault their logic. The ones I know got in through sacrifice, scrimping, saving under conditions that don't appear to be any less challenging for them.

My kids are in their 20s, they have a few friends that managed to get into houses -- those friends (and my kids) have no pictures of them climbing Machu Pichu, or Barefoot cruising through the Carribean, VWs instead of BMWs.

Boomers I know do have pictures of them climbing Machu Pichu, and sailing Barefoot cruising through the Carribean, .BMWs, and URALs - but they have less hair and it's grey. They chose to have fun in their last 40 years, at the expense of their first 10.

Boomer Logic seems to be working for a lot of them.

You're not wrong; being frugal early pays dividends later on. Where your argument falls apart on the barrier to ownership is the $$ needed upfront to get into the market. A 10% jump in the 90s meant you needed an extra 10k .. which you could do with a part time job and maintaining a frugal lifestyle.

Today's 10% jump needs an impossible $75k-100k cash saved.

You couldn't ask for a better environment to be a RE investor. People earning $150K with perfect credit are stuck renting as they can't come up with the requisite downpayments... I see it first hand. The middle class is giving up on ownership at an alarming pace. Go back to post-WW2 Berlin and 70s NYC if you want to see a similar divide. History shows how it plays out in the coming decades. (Cough, demagogy, cough)

 

[backmarkerducati]

We have run the math on here a few times.... numbers will vary based on short term issues, like today.

The conclusion, over and over, based on monthly payments we end up about double the historical number indexed to inflation and individual incomes. Historically households were one income now they are mostly two. Historically interests rates were much, much higher than a couple of years ago and of course two incomes vs one. Makes sense as a household can only afford so much on average and a bank has rules about income to monthly costs. The rub, historical low interest rates meant higher prices, which means a barrier to entry being a much higher down-payment in a low interest rate environment (like recently). The second rub, marry someone that does not work, works at the mall, or you are single, those dual income people are pricing you out.

The answer--in theory, increase interest rates. BUT now anyone that has purchased in the last 10 to 15 years or so are going to get hurt, even more so if they are only 5 years in (still have high mortgage amount but now also higher rates). Increased rates will not have an immediate impact on prices and the impact on prices does not help current owners, it takes years to self level based on the above and for people to be forced to sell or worse yet default.

The calcs above were just before COVID. Right now is a mess as prices have not been forced down much (or at all) by the interest rates and unless interest rates stay like this for a few years they will be sticky. It sorts itself out one way or another.

I have a few friends selling right now as they can no longer afford the mortgage at renewal. Some are also doing interest only on a LOC just trying to scrape by hoping that rates drop in 2024...

Most boomers of course are sitting high and dry as the mortgage is paid...

 

[crankcall]

When I married , we lived in a crap basement apt and I made enough for rent and groceries, cars were both paid off ( used cars , not elegant) and no student debt, wifer came from a good family and I was thrown out of high school. We banked her nurses salary 100% , within yr one we bought a starter house. Then in 5 yrs a better house, then in 10yrs a better house and a cottage , ditched cottage and bought Mcmansion, but it was a situation of taking gains and exploiting them.
Im under the window to be a boomer , but the logic did play out for me. BUT we started in a crappy basement apartment, and my Mom prayed daily we would get out alive. Jesus and compound interest showed us the way.

 

[Mad Mike]

You're not wrong; being frugal early pays dividends later on. Where your argument falls apart on the barrier to ownership is the $$ needed upfront to get into the market. A 10% jump in the 90s meant you needed an extra 10k .. which you could do with a part time job and maintaining a frugal lifestyle.

Yup. But you can't use an arbitrary 10%. Real estate prices can be on the rise, fall or hold for protracted periods of time. If you look at a 100KM radius from Toronto city hall, you will see rising prices closer, hold on prices as you reach the edge of the GTA, and falling prices outside.

You couldn't ask for a better environment to be a RE investor. People earning $150K with perfect credit are stuck renting as they can't come up with the requisite downpayments... I see it first hand. The middle class is giving up on ownership at an alarming pace. Go back to post-WW2 Berlin and 70s NYC if you want to see a similar divide. History shows how it plays out in the coming decades. (Cough, demagogy, cough)

You're not wrong... once an economic hub gets built out (meaning there is no more development lands), demand overtakes supply and supply can never reach equilibrium. The original Greenbelt mandate was to protect the Oak Ridges Moraine, significant forest, and wetlands - a great idea led by gov't and executed by a group of that represented the interests of developers, environmentalists, scientists, and planners. The second kick at the can was handed just to environmentalists who simply colored every acre of undeveloped land around the GTA green.

I'm not anti green, but reality is the sudden creation of a green moat around the country's economic engine quickly altered the housing supply side without regard for demand, and without regard for the needs of the average wage earner who's interests were overlooked by the gov't of the day.

To make matters worse, for the last several years the Feds poor planning targeted wealthy immigrants who could bring cash and jobs, not the middle-class workers Canada needs to build and service things -- the immigrants Canada desperately needs. With pockets full of money, rich new Canadians headed to Toronto and Montreal which exacerbated an already challenging home supply. So... closing development lands squeezes supply and immigration policies juice demand. What other outcome could we expect?

The reality is that home affordability in the GTA disappears an inch at a time in an outward direction, and has been that way for decades. It's never coming back. It's been that way for more than 50 years.

 

[Mad Mike]

...

The answer--in theory, increase interest rates. BUT now anyone that has purchased in the last 10 to 15 years or so are going to get hurt, even more so if they are only 5 years in (still have high mortgage amount but now also higher rates). Increased rates will not have an immediate impact on prices and the impact on prices does not help current owners, it takes years to self level based on the above and for people to be forced to sell or worse yet default.

The calcs above were just before COVID. Right now is a mess as prices have not been forced down much (or at all) by the interest rates and unless interest rates stay like this for a few years they will be sticky. It sorts itself out one way or another.

I have a few friends selling right now as they can no longer afford the mortgage at renewal. Some are also doing interest only on a LOC just trying to scrape by hoping that rates drop in 2024...

Most boomers of course are sitting high and dry as the mortgage is paid...

That only works when there is an equilibrium of supply and demand. Look at Burlington, Barrie, and east DurhamLots of new builds increases supply, and the hike in interest has dropped speculator demand out. In those areas supply is catching demand g and we've seen some big price corrections.

But closer in, that's not going to happen. Demand is still growing faster than supply of so prices are not likely to fall.

Another thing that's inevitable - Boomers are near the end, they are dying off now. When they die, they leave money to their GenX kids who will juice GTA demand for at least another generation, pushing the radius of unaffordability even further.

 

[Dresden]

Another thing that's inevitable - Boomers are near the end, they are dying off now. When they die, they leave money to their GenX kids who will juice GTA demand for at least another generation, pushing the radius of unaffordability even further.

This has been the ongoing trend in investing circles in the past decade coupled with downward interest rates.

Paywall:
New York Times - The Greatest Wealth Transfer in History Is Here


Crappier article but free if you don't have Apple News or NYT subscription:

Posthaste: Gen X snapping up cottages amid $1-trillion wealth transfer from baby boomers

Gen X is driving buying activity across Canada is behind 91% of cottage transactions, says a new report from Re/Max Canada. Find out more.

financialpost.com

 

[nobbie48]

This has been the ongoing trend in investing circles in the past decade coupled with downward interest rates.

Paywall:
New York Times - The Greatest Wealth Transfer in History Is Here


Crappier article but free if you don't have Apple News or NYT subscription:

Posthaste: Gen X snapping up cottages amid $1-trillion wealth transfer from baby boomers

Gen X is driving buying activity across Canada is behind 91% of cottage transactions, says a new report from Re/Max Canada. Find out more.

financialpost.com

If the boomer only leaves his two kids the $1.5 M house and they haven't been prudent the $750 K each means a big mortgage if they want the same type of house in which they grew up. Bigger family, bigger problem.

Marry wrong and half the new place goes up in smoke.

 

[FullMotoJacket]

Marry and half the new place goes up in smoke.

FTFY

 

[SnazzyBalkan]

Boomers ready to lose their assets/savings to health bills?

 

[crankcall]

Boomers ready to lose their assets/savings to health bills?

Probably not an issue for most actual boomers ( of course there is always some losers )
Your 1.5m house buys 24yrs of $4700 a month retirement home , even if it makes no interest. Nursing homes cost less 3,000k since they are subsidized, and we have OHIP , prescription are nearly free over 65yr of age . And most smart boomers have additional insurance .
Sure there are lots of boomers that live in crappy apartments, have no savings and will not get a corner room with a view . But the social network will find them a place .

What’s your next carrot ?


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[nobbie48]

Probably not an issue for most actual boomers ( of course there is always some losers )
Your 1.5m house buys 24yrs of $4700 a month retirement home , even if it makes no interest. Nursing homes cost less 3,000k since they are subsidized, and we have OHIP , prescription are nearly free over 65yr of age . And most smart boomers have additional insurance .
Sure there are lots of boomers that live in crappy apartments, have no savings and will not get a corner room with a view . But the social network will find them a place .

What’s your next carrot ?


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It's locked into many brains that what the parents worked, scrimped and saved for is owed to the kids. Age related costs are expected to be taken care of through taxes. Therefore even more immigration to feed the Ponzi scheme, beyond the immigration needed for economic growth.

IMO the original cap gain freedom was so mom and pop had a roof over their heads, not to gold plate the path for the offspring.

If your kids make it to thirty you will have an idea if they are good with money. If they are they don't need yours. If they aren't they'll only waste yours. Spend it on yourself.

 

[SnazzyBalkan]

Probably not an issue for most actual boomers ( of course there is always some losers )
Your 1.5m house buys 24yrs of $4700 a month retirement home , even if it makes no interest. Nursing homes cost less 3,000k since they are subsidized, and we have OHIP , prescription are nearly free over 65yr of age . And most smart boomers have additional insurance .
Sure there are lots of boomers that live in crappy apartments, have no savings and will not get a corner room with a view . But the social network will find them a place .

What’s your next carrot ?


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Probably...maybe...most...social networks....you solved it all lol. Can't argue with this!

The majority of boomers are 'losers' as you say. Have a chat with anyone in a bank...they will tell you. It is ugly.

 

[woot]

I'm 36 so definitely not a boomer.

I bought my first house at 21 in 2009. I wanted a little house in the country near the water but ended up with a little townhouse without a garage or AC and needed a complete reno.. The time was right to buy but I couldn't afford what I wanted so I settled and bought the little house in the country near the water the 3rd time when I was 30.

-Need to keep expectations low. If starting in the market then expect to be able to buy what is at the very bottom of the market.
-Get out of Toronto and very few houses are over $1M.
-Find a desperate seller. You don't need to be rich to be evil. First house I bought was from a guy who's main business had just declared bankruptcy. Second house was from an out of province family of a deceased man. Both times I was able to negotiate roughly 20% off.

When I was out for a boat ride on the weekend I noted that even the smallest new-built cottage is larger then literally every single old cottage. Yet families used to be bigger.

 

[GreyGhost]

I'm 36 so definitely not a boomer.

I bought my first house at 21 in 2009. I wanted a little house in the country near the water but ended up with a little townhouse without a garage or AC and needed a complete reno.. The time was right to buy but I couldn't afford what I wanted so I settled and bought the little house in the country near the water the 3rd time when I was 30.

-Need to keep expectations low. If starting in the market then expect to be able to buy what is at the very bottom of the market.
-Get out of Toronto and very few houses are over $1M.
-Find a desperate seller. You don't need to be rich to be evil. First house I bought was from a guy who's main business had just declared bankruptcy. Second house was from an out of province family of a deceased man. Both times I was able to negotiate roughly 20% off.

When I was out for a boat ride on the weekend I noted that even the smallest new-built cottage is larger then literally every single old cottage. Yet families used to be bigger.

Near but outside of Barrie, very few six figure transactions happen. Even semi's are selling for seven figures (which is nuts but whatever).

As for size of new cottages, that is partially driven by land value. When you could buy the land for 50k, put on a 50k cottage and off you go. Now that cottage lots are pushing 500k for an empty lot, a 50K cottage is a high cost of ownership. When you sell to the next person for 600+, they won't want a cabin and will value it at zero. Most of the 500k lots are getting 500k-1.5M builds on them. The people buying cottages now are not average families. They are just more trophies to add to the collection for the rich. If you have a seven bed cottage, you have one up on your buddy with a five bed cottage. You really don't care if you only use two bedrooms. Hell, many of these cottages only get visited a few days a year. Expenses would be well over 5K per day used but they don't care.

 

[FullMotoJacket]

even the smallest new-built cottage is larger then literally every single old cottage. Yet families used to be bigger.

The word cottage can be retired. No one has built a cottage in 15 years at least. Everything built since then uses the Princess Margaret Lottery floor plan.