City
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.
Discussion
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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.
For example, a fixer semi at College & Spadina for $685K?.
Yes, affordability is an important consideration, but how do we measure it?
Recent data says affordability is actually <a href="http://www.rbc.com/economics/market/hi_house.html"; target="_blank">improving</a> 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
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.
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.