Crazy Real Estate market !!!

[pendlebg]

Re: Crazy Real Estate market !!!

3% annual is very conservative for Toronto. If everything has doubled as everyone says in last ten years that means 7% year over year compounding to achieve 100% appreciation. I picked 75% out of air. According to this calculator, that's 5.75% year over year.

This exercise for me is if I can completely retire by selling my investment real estate portfolio. If there is a major market correction when the time comes, I actually would be farther ahead by keeping what I got as everything is always fully rented. I would just have to keep landlording that's all lol.

Yes I know 3% is conservative when comparing to the past 15 years. but go back and look at the returns for the previous period of similiar length, 1989 - 2001/2.

[bl8d]

Re: Crazy Real Estate market !!!

better buy now,before the asteroid hits in 2170, or sooner.

https://www.thestar.com/business/real_estate/2016/11/03/october-is-another-hot-month-for-torontos-real-estate-as-prices-soar.html

[Fore Warned]

Re: Crazy Real Estate market !!!

Yes I know 3% is conservative when comparing to the past 15 years. but go back and look at the returns for the previous period of similiar length, 1989 - 2001/2.

Long term, i.e. decades, housing price trends show moderate increases over time, which don't come anywhere near today's market trends in Toronto, which are an anomaly when compared to earlier periods.

Once cost are factored in, considering buying, selling, financing costs, taxes, maintenance etc, profit margins over time are not as spectacular as sales price increases alone may portray. A long term 3% increase forecast, even in today's market is not unrealistic.

We are in a period of extreme housing cost escalation here in Toronto. How long that lasts is anybody's guess.

Actually getting a return on investment can be problematic if you are dealing with a principle residence. You will still need a place to live and could benefit only if you downsized or moved somewhere where housing is less expensive.

See http://www.investopedia.com/articles...ate-market.asp

[Blassy]

Re: Crazy Real Estate market !!!

I also believe the Toronto housing market is fueling growth FAR outside the city. While it's becoming unaffordable for some to live there, it's quickly becoming the same for everywhere even close.
I left the beaches 8 years ago for Ancaster - was much more affordable.
Owned that house 2 years, added a back deck and made 15%.
Moved to Welland 6 years ago. Granted we have done fairly extensive renovations but for what we paid then you can't get near our hood now.
A complete gut across the street (and I mean nothing left but the 4 outside walls) just sold this summer for more than we paid.

[pendlebg]

Re: Crazy Real Estate market !!!

I would still point people to go back and look at the local RE market of the late 1980's. For anyone who thinks what has happened here lately is the worst ever housing purchase affordability you would be wrong and if you are over 30 it is not even the worst in your lifetime.

Housing affordability peaked in the late 80's at 55% of household income required to pay mortgage, interest, property tax and utilities on the average Toronto home. That plunged down to below 35% by around 1992. It actually has stayed within the 30 - 35% band from 1992 until sometime in 2013/14 where it rose above 35% again although even now it is still not yet back above 40%.

I am not suggesting that nothing be done until it hits 55% again but the market is a long, long way from getting up to where it was in 80's. For those who complain about affordability now, yes it is creeping up which is a concern but this is not the housing armageddon some want to make it out to be. One other point would be Toronto managed to survive the late 80;s as well, although some did have to sit and wait quite a period of time for their housing value to recover.

[Bern]

Re: Crazy Real Estate market !!!

I would still point people to go back and look at the local RE market of the late 1980's. For anyone who thinks what has happened here lately is the worst ever housing purchase affordability you would be wrong and if you are over 30 it is not even the worst in your lifetime.

Housing affordability peaked in the late 80's at 55% of household income required to pay mortgage, interest, property tax and utilities on the average Toronto home. That plunged down to below 35% by around 1992. It actually has stayed within the 30 - 35% band from 1992 until sometime in 2013/14 where it rose above 35% again although even now it is still not yet back above 40%.

I am not suggesting that nothing be done until it hits 55% again but the market is a long, long way from getting up to where it was in 80's. For those who complain about affordability now, yes it is creeping up which is a concern but this is not the housing armageddon some want to make it out to be. One other point would be Toronto managed to survive the late 80;s as well, although some did have to sit and wait quite a period of time for their housing value to recover.

True, but even a 1% rise in interest rates would quickly change that affordability metric.

[golfinseb]

Re: Crazy Real Estate market !!!

I would still point people to go back and look at the local RE market of the late 1980's. For anyone who thinks what has happened here lately is the worst ever housing purchase affordability you would be wrong and if you are over 30 it is not even the worst in your lifetime.

Housing affordability peaked in the late 80's at 55% of household income required to pay mortgage, interest, property tax and utilities on the average Toronto home. That plunged down to below 35% by around 1992. It actually has stayed within the 30 - 35% band from 1992 until sometime in 2013/14 where it rose above 35% again although even now it is still not yet back above 40%.

I am not suggesting that nothing be done until it hits 55% again but the market is a long, long way from getting up to where it was in 80's. For those who complain about affordability now, yes it is creeping up which is a concern but this is not the housing armageddon some want to make it out to be. One other point would be Toronto managed to survive the late 80;s as well, although some did have to sit and wait quite a period of time for their housing value to recover.

Where do these stats come from? If house prices have doubled, incomes have not, than this seems illogical. Interest rates can only account for so much.

[Weirfan]

Re: Crazy Real Estate market !!!

Where do these stats come from? If house prices have doubled, incomes have not, than this seems illogical. Interest rates can only account for so much.

I'm sure there are many reasons to account for it ( foriegn ownership, speculators, increased population , demographics etc) but in the 80"s the bank's prime lending rate ranged from anywhere between 9 and 22 % ....it's what been around 2% for a long time now recently

[xrox]

Re: Crazy Real Estate market !!!

True, but even a 1% rise in interest rates would quickly change that affordability metric.

Absolutely. Back in the 80s the mortgage payment was the problem. Today, it is the purchase price of the home that is the problem. Very different animal IMO. Some people don't understand the risk.

[dmcdam]

Re: Crazy Real Estate market !!!

Where do these stats come from? If house prices have doubled, incomes have not, than this seems illogical. Interest rates can only account for so much.

Income is probably rising further and faster than you realize. Average median annual household income went from about $70k in 2010 up to almost $80k in 2014. Add to that that there are way more two income families than ever before and it's not too much of a stretch to see how those numbers work.

[pendlebg]

Re: Crazy Real Estate market !!!

Where do these stats come from? If house prices have doubled, incomes have not, than this seems illogical. Interest rates can only account for so much.

Hot off the presses, look at the bottom chart in the linked deck

http://www.trebhome.com/market_news/housing_charts/index.htm

[xrox]

Re: Crazy Real Estate market !!!

Hot off the presses, look at the bottom chart in the linked deck

http://www.trebhome.com/market_news/...arts/index.htm

Seems to track very well with lending rate up until 2009 and then they diverge (lending rate down, affordability index up). Well there is your problem We should be at a lending rate of ~10% based on historical data?

[pendlebg]

Re: Crazy Real Estate market !!!

Seems to track very well with lending rate up until 2009 and then they diverge (lending rate down, affordability index up). Well there is your problem We should be at a lending rate of ~10% based on historical data?

Ok, but how do any of the underlying reasons why those in 1989 paid a much higher % of their household income on housing costs than people today do matter. None of the reasons change the fact that they did and housing is cheaper now than it was in the late 80's.

To listen to many people speak of the current house prices around Toronto would be to conclude that the prices are at unheard of levels never before encountered. My point is they are not currently as high compared to income as they were not even 30 years ago.

[xrox]

Re: Crazy Real Estate market !!!

My point is they are not currently as high compared to income as they were not even 30 years ago.

No ?? Affordability index just means what percent of your income goes towards the home. That includes interest. It is not a measure of home price to income. I'm no expert here so am I understanding this correctly?

I think what you meant was that if people can afford to use up 54% of their income in the 80s then using 35% now means we are ok.

[pendlebg]

Re: Crazy Real Estate market !!!

No ?? Affordability index just means what percent of your income goes towards the home. That includes interest. It is not a measure of home price to income. I'm no expert here so am I understanding this correctly?

I think what you meant was that if people can afford to use up 54% of their income in the 80s then using 35% now means we are ok.

I am putting this in even dollar terms to try and make is easier to explain.

In 1989 if the average household income in Toronto was $100K then the average house in Toronto cost $55K a year to pay for mortgage (principal and interest, taxes, utilities)

In 2016 if the average household income in Toronto was $100K then the
average house in Toronto cost approx. $40K to pay for mortgage (principal and interest, taxes, utilities)

The homeowner in 1989 and 2016 has to pay that in real dollars. The dollars coming out of his net take home pay do not care if they end up paying off principal or interest or taxes or utilities.