COVID and the housing market

[nobbie48]

We traded condo living for an acreage outside Vancouver when we lived there, granted at a different phase of life. We'd consumed a steady diet of Escape to the Country on the BBC, had enough of the chicken coop, and wanted pastoral rural living. To give you an idea of my mindset at the time, I wanted a backyard where I couldn't see my neighbours. Ended up getting that on a couple of acres of sloped land between Maple Ridge and Mission at the feet of some mountains, half wooded with a creek running through. At the time of purchase, I was convinced it was paradise and that we'd never move.

Fast forward a few years, and the novelty had definitely worn off. 20 minutes each way to get a bag of milk made even simple trips take over an hour. Nothing walkable, so every meal out, coffee, whatever, was a trip in the car, which also meant max one beer with lunch or dinner (BC is .05 for drinking and driving). Too far out for delivery. Walking the dogs got a bit dull, as there were only a couple of routes you could take that were less than an hour. Wildlife in the back could be sketchy, with a neighbour attacked by a bear, cougars gobbling up dogs and cats, and coyotes getting bigger and more brazen by the year. Power outages in the winter were semi-regular, and driving in the snow was always sketchy with the hills and corners everywhere. Neighbours were cordial but distant, both literally and figuratively. And maintaining a couple acres is a lot of work, whether it's shoveling/snowblowing a long turnaround driveway, cutting down dead trees, or mowing a large, sloped yard.

There was lots great, don't get me wrong, but the bad had firmly started to outweigh the good. Part of the reason we ended up where we did here in Hamilton was we wanted a neighbourhood with a close-knit community that was walkable to the basics, with a decent selection of cafes/bars/restaurants nearby, and a good area for walking dogs. Some of that want list was a direct reaction to not having it where we were. Rural living has a lot of pluses, bit it's not for everyone, and it definitely wasn't for us...

I am often attracted to something, thinking I want to own it. Then when the full impact hits I realize I only want to rent it for a while.

I don't believe in retiring to a rocking chair but harnessing one's self to an over sized property isn't fun either.

 

[nobbie48]

I am looking for some opinions on where RE might go. Articles and bank predictions state sales could drop as much as 40%+ and prices will drop ~10%+. Does that mean there will be a lot less listings or an excess of unsold listings?

It's unfortunate that one's home is now part of their investment portfolio but that's the world and few of us can beat the system.

An awkward question is "What home would guarantee you satisfaction for the rest of your life."

A lot of people would say 4 BR, 2 car garage on a good sized lot near shopping, parks, schools, activities and jobs.

In Toronto that starts around $2M. Short of a lottery win, mega inheritance or mega paycheck it's not a first home. If you overpay for your starter you may not be able to work your way up to the dream home. Like it or not, you become a real estate investor.

If it's your forever dream home spend as much as you want because you'll never go shopping again.

If you're working your way up, shop bargains. If you're handy go for a fixer upper or poorly decorated place that turns off buyers.

The market is a crap shoot. Interest rates are hitting people hard so there will be desperation sales but immigration means there will be more demand. When does the rope go taught? Every "For Sale" sign has its own story.

Some homes may have been speculative sales with the owner saying "If I can get $2M for my dump I'll ......" Those fade away.

I've never had a house staged and assume the owner vacates the property and is under more pressure, paying to live elsewhere or running two homes.

The only way you'll know is to bid low. I wouldn't recommend accepting a place that wasn't at least tolerable should things not work out for a while.

 

[Georg3__]

@nobbie48

Excellent explanation

 

[crankcall]

If I started again I would buy the dream house first and suffer short pain for long gain. . That 2m house will eventually be a 2.5 or 3 . Trading up is expensive in its own right . It’s close to $80k to move across the street in Oakville with transfer tax , commissions and payouts .
I lived in a couple appliance crates before I bought my forever home , which I sold 22 yrs later… if I wanted big , I’d go early . Historically it always goes up eventually.


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[monkeyfarm]

I am looking for some opinions on where RE might go. Articles and bank predictions state sales could drop as much as 40%+ and prices will drop ~10%+. Does that mean there will be a lot less listings or an excess of unsold listings?

Probably one followed by the other? Investors will pull out of the market for now so we'll likely see less listings (refference here). I think statistically, Canada has more fiscally responsible citizens so were not likely to see a big wave of foreclosures, just folks who may be stretched very thin for some time (short, hopefully).

It's a bit funny? Not sure if that's the right word, but reading this Globe & Mail article from 2015 is oddly prophetic and also foolishly optimistic, at least some of the folks interviewed for it are.

What have we learned from the 1980s and that 21% interest rate?

"First of all, “central bankers now have 20 or 30 years of experience fighting inflation,” Mr. Tal said, and they are not as likely to “overshoot” in their attempts to stop inflation by jacking up interest rates too sharply."

"Mr. Douglas, the graphic designer who survived his painfully high mortgage rate of the 1980s, has a similar warning. “You can afford it now, but all the needle has to do is move a bit, and you are done,” he said. “It only takes a point or two. You will lose everything.”"

 

[Mad Mike]

I Live in the country now but only a few KMS from a city. Cant see my neighbors and love it. I have lived in downtown TO and London but probably never again.

Downtown TO would be OK for me. London <0.

 

[GreyGhost]

If I started again I would buy the dream house first and suffer short pain for long gain. . That 2m house will eventually be a 2.5 or 3 . Trading up is expensive in its own right . It’s close to $80k to move across the street in Oakville with transfer tax , commissions and payouts .
I lived in a couple appliance crates before I bought my forever home , which I sold 22 yrs later… if I wanted big , I’d go early . Historically it always goes up eventually.


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Yup. If you can swing the lifetime house the first time, you should win long term. Our first house went up ~35K a year. Unfortunately the house we bought next had been going up ~65K a year. If we bought this house first (it would have been possible but wasn't considered) we would be almost done paying instead of having another 20 years to go.

 

[monkeyfarm]

Downtown TO would be OK for me. London <0.

The city core seems to have a cucaracha problem, but what high density area doesn't.

 

[GreyGhost]

The city core seems to have a cucaracha problem, but what high density area doesn't.

Bugs are tough. Certain religions protect them. You can't purge the building if you leave nests sitting in a bunch of units. Its very hard to get access to commit genocide when people start pounding the religion drum.

 

[Mad Mike]

If I started again I would buy the dream house first and suffer short pain for long gain. . That 2m house will eventually be a 2.5 or 3 . Trading up is expensive in its own right . It’s close to $80k to move across the street in Oakville with transfer tax , commissions and payouts .
I lived in a couple appliance crates before I bought my forever home , which I sold 22 yrs later… if I wanted big , I’d go early . Historically it always goes up eventually.


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I like that approach, I did that in my late 20s. The dream house build was a great move at the time, if I had a do-over I'd repeat it.

Unfortunately, the dream slipped away during the big RE correction in the early 90s. The market schooled me on greed and leverage - another smarter guy ended up with my dream castle.

 

[monkeyfarm]

Bugs are tough. Certain religions protect them. You can't purge the building if you leave nests sitting in a bunch of units. Its very hard to get access to commit genocide when people start pounding the religion drum.

Had this problem when the wife and I first moved in together, the unit looked clean enough and we liked the area. We got the keys early and went to excitedly check out our first place together the night before we were set to move in and found some unwanted guests. We didn't do our homework well enough it seems, but after doing some digging after it turns out the building had a similar problem. Some units would refuse pest control and there was nothing management could do about it. So after a treatment, the survivors would quickly repopulate. We lost a month's rent on that one...

 

[Georg3__]

If I started again I would buy the dream house first and suffer short pain for long gain. . That 2m house will eventually be a 2.5 or 3 . Trading up is expensive in its own right . It’s close to $80k to move across the street in Oakville with transfer tax , commissions and payouts .
I lived in a couple appliance crates before I bought my forever home , which I sold 22 yrs later… if I wanted big , I’d go early . Historically it always goes up eventually.


Sent from my iPhone using GTAMotorcycle.com

This is my dilemma too!

My current rental situation is actually amazing and cheap... Do we continue living here until we get the big down payment or get us a 2 bedroom condo and in five years move up

 

[GreyGhost]

This is my dilemma too!

My current rental situation is actually amazing and cheap... Do we continue living here until we get the big down payment or get us a 2 bedroom condo and in five years move up

I would say buy. If the choice was small or big now, I vote big. If you stay with nothing, your return on your downpayment sucks amd the market runs away (unless you highly leverage your downpayment which is quite risky). Hell, if your rent is cheap, buy and rent out the place you own.

 

[Mad Mike]

M

I am looking for some opinions on where RE might go. Articles and bank predictions state sales could drop as much as 40%+ and prices will drop ~10%+. Does that mean there will be a lot less listings or an excess of unsold listings?

My feeling is supply and demand will have a bigger impact than interest rates as long as BOC prime stays below 5%.

1) Homes in areas with high demand and little to no significant subdivision building (Toronto, Pickering, Markham), will see the number of sales decrease, and a small decline in prices.
2) Areas with lots of new building and areas outside the GTA will see substantial price drops. Demand in those areas was fuelled in part by fuelled by speculation, that's has dried up so prices will correct accordingly. I'd also expect people to walk from underwater pre-con buys adding more inventory to those markets.
3) GTA Condos - this is a harder call. My guess is small units (studio, bachelors, 1 br) units will fall the most, probably back to a level that is supported by their current market rate rents.
4) Recreational - not much change as demand is still high, as investors use them as income-generating properties.

 

[Mad Mike]

This is my dilemma too!

My current rental situation is actually amazing and cheap... Do we continue living here until we get the big down payment or get us a 2 bedroom condo and in five years move up

I'm wary of condos as a primary home investment. The mo main fees and assessments are wildcards you cannot control. You would think condos could achieve economies of scale on main't costs -- they don't -- they are usually way higher than what a self-maintained equivalent would cost. Channeling the ain't savings into a freehold property gets you further faster.

I like condos as a second property investment -- the maint premium is a cost of business -- it frees the investor from the arduous task of upkeeping a second property.

 

[Georg3__]

I would say buy. If the choice was small or big now, I vote big. If you stay with nothing, your return on your downpayment sucks amd the market runs away (unless you highly leverage your downpayment which is quite risky). Hell, if your rent is cheap, buy and rent out the place you own.

Ya we are thinking about this too. Buy something in KW and rent it out while we work in Toronto. BUT we were told this was not a good idea because when we want to actually settle down we need to show we can float both mortgages, loss of first time buyer perks???

 

[monkeyfarm]

Ya we are thinking about this too. Buy something in KW and rent it out while we work in Toronto. BUT we were told this was not a good idea because when we want to actually settle down we need to show we can float both mortgages, loss of first time buyer perks???

I guess each partner can use the perk one time, don't burn both up on the first house? Or so I'm told by some very regretful folks

 

[GreyGhost]

Ya we are thinking about this too. Buy something in KW and rent it out while we work in Toronto. BUT we were told this was not a good idea because when we want to actually settle down we need to show we can float both mortgages, loss of first time buyer perks???

Or move into the rental unit. I have no idea about first time buyer perks if your first property is a rental.

 

[Evoex]

Ya we are thinking about this too. Buy something in KW and rent it out while we work in Toronto. BUT we were told this was not a good idea because when we want to actually settle down we need to show we can float both mortgages, loss of first time buyer perks???

Just buy my property and become TO land baron. Problem solved.

 

[GreyGhost]

Just buy my property and become TO land baron. Problem solved.

Are you looking for a partnership? I dont think george has enough firepower to buy yours.