Is Now a Good Time to Buy?
It's that time of year again. The weather is warming up, the Maple Leafs are booking their tee times (sorry Leafs' fans), and 'For Sale' signs are popping up on front lawns across the city. Yep, the Real Estate season is in full swing. It's about this time every year that thousands of Torontonians ask themselves, is now a good time to buy? Would I be better off renting?
In recent years, the debate has been split between what I call the 'boosters' and the 'bubblers'. The boosters can always find a reason why it is a good time to buy (Market is going up? Buy now while you still can! Market is going down? Great time for a bargain!) On the other side, the bubblers can always find something to support their belief that the market is overvalued and is about to crash.
Boosters generally tend to be people who directly benefit from a growing real estate market - Realtors (guilty), mortgage brokers, developers, city councilors, etc. Bubblers tend to be people who do not own any real estate. So who's right? My answer probably won't wow you: it depends.
It depends because deciding whether or not to buy a home isn't a decision that should be made simply by answering the question, is the market going up or going down? There are countless other factors that need to be considered and each person's individual situation is different. But is there a bubble? Maybe, but I doubt it.
The New York Times tackled the rent vs. buy debate in a recent article. The author concludes that in many markets in the U.S. right now, you'd be better off to rent than to buy. The problem with extrapolating this conclusion to Toronto, is that we have not experienced the slump that many markets in the U.S. have, which is what the entire article is based on. As I said before, the Toronto market is still insane.
Still not sure if buying makes sense for you? Try using this great rent vs. buy calculator that accompanied the NYT article.
Photo by William Self from the blogTO Flickr pool.
Comments (14)
I remember the last big real estate boom in Toronto, and the subsequent crash. None of the arguments have changed.
What I saw as the central question then and now is pretty simple:
Can a midrange couple afford to buy and maintain a house, and more importantly, could they carry the mortgage even if one of them became unemployed?
I'd say that Toronto once again has hit the point where the answer is no, they can't. Prices will not continue upwards forever, and even if they did the costs of purchasing are too high for an ever growing group of purchasers.
So sooner or later they will fall, either because of a recession, or because the market just can't support them.
Well, I'll say one thing, it's a great time to SELL! If you're 'in the market' already, it's not so bad. But coming in blind... The new 5% downpayment option people are taking with 35-45 year amortizations are roping in people who couldn't otherwise make the jump to ownership - but is it worth it for them?
There WILL come a time, very soon, where, for most of the population, it won't be a good time to rent OR buy. You can't afford a house (or maybe don't want one) and the rents keep going up.
Prices will continue to rise, and especially downtown. I've had realtors at my door practically begging me to list the house, but I can't afford to move due to the huge price increases in the immediate area.
For example, a fixer semi at College & Spadina for $685K?.
people should just move to hamilton. you can buy four decent houses in the downtown core for the price of one fixer in toronto. i used to think my future was in this town, but lately i've been looking elsewhere.
Barry R-I'm not saying your logic is incorrect, but I'm going to push you a bit and argue that if that were true, then every major world city would always be in a 'bubble' situation.
Yes, affordability is an important consideration, but how do we measure it?
Recent data says affordability is actually improving in Toronto.
Hamish-you're bang on about it being a seller's market.
Allan-let's talk ;)
Bart-Hamilton? I'm not even going to touch that one...hehehe
You're not going to touch Hamilton, but lots of other people already are. The savings are just to big to disregard the option. Not to mention Hamilton's urban life dwarfs anything north or east or Toronto.
Believe me, I've floated the idea, but the family is hooked on friends, family, doctors, transportation, restaurants, not Hamilton, etc.
Me, I don't want to commute more than the 20 minute walk to work I have now. It's all in what you're willing to trade off.
I'll hop in on the Hamilton--I feel I'm qualified, as I commute from downtown TO to Mac every day as a grad student. It's truly awful.
If you choose to work in Hamilton, don't expect to make much money (in fairness, some industries such as healthcare pay well regardless of geography).
If you move to the boons, you have to accept a killer commute or lower earning power. There are not too many hi-zoot management consulting or investment banking jobs in Hamilton, Whitby, or Barrie.
Toronto's an expensive city because it's the hub of Canada. You can buy your own place for $250K and walk 5 minutes to King & Bay. Try that in any other G7 financial centre, and you'll find that Toronto is still a screaming deal.
Remember, Hamilton is a city without Starbucks.
I read this post some time ago and found it very interesting. Finally able to write about it now that our homebuyers blog is up and running. I would add that for many people, renting remains a very compelling option if buying means moving out of the urban core and changing the rituals that make earning rent/mortgage most meaningful - walking or riding to work, seeing family and friends regularly and participating in community events. Getting first-time homebuyers onto the property ladder, in a way that complements lifestyle preferences, continues to be a real (but not hopeless) challenge.
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