Toronto Home Buyer Wants To ‘Wait For The Next Cycle’ Before Purchasing
A hopeful Toronto home buyer recently sent me this email…
Hi Thomas and Sally,
How are you? We met about 5 years ago, at one of your home buyer workshop presentations since we were thinking to buy a house at that time. But we missed that opportunity, prices had skyrocketed in Toronto and we decided to postpone buying a house until the next cycle. We all know that this cycle is about to end, so here is my question: how was March-April? Was it as good as usual? Have prices appreciated compared to January-February?
I’d appreciate if you could give us some accurate information about Toronto housing market, so we can plan in advance for buying that house, or wait another year (or whatever it takes to get into the next cycle) so we can take advantage of lower prices.
Thanks a lot,
Ken
My response to him was…
Hi Ken,
Hate to tell you this but waiting for the ‘next cycle’ won’t work.
Our market in Toronto has been moderately increasing year over year since 1997… the key word there is moderate!
We’re not going to have the price corrections people are seeing in some parts of the US right now which are due entirely to very rapid (20+% or more) annual appreciation over a number of years which is unsustainable.
Yes real estate goes in cycles but, if we do suffer a ‘downturn’, it will be very modest… more like a flattening of price increases rather than a decline in prices.
The economics of the GTA economy are totally different than many of the declining US communities… we’re strong with increasing population growth and business growth. In contrast, they’re experiencing an exodus of people in Southern California for example because of affordability.
In addition, their average sales prices in SoCal are much higher than those in Toronto . In many cases above $500,000. We’re quite modest even compared to other major cities in Canada .
April 2007 was the best month for sales volume in Toronto MLS history.
2006 was a record year, so was 2005, so was 2004. Imagine if you’d purchased a $300,000 home 5 years ago in Toronto . You’d have gained conservatively about $100,000 in equity (based on 5-6% appreciation annually). In some areas, it’s gone up more than that.
You might want to take that ‘leap of faith’ and quit trying to outguess something that’s not guessable and just go and purchase something that’s good for you and your family and quit paying rent and wasting that money.
Let me know if we can help you. By the way you might want to come to another home buyer workshop to refresh your knowledge about the home buying process, etc. Go to
All the best,
Thomas
He responded with…
Hi Thomas,
Thank you so much for your quick response. Indeed, the news are not good (for me), but that’s OK. If we waited 5 years, we can wait longer, that’s not a problem. At least, we both agree that real estate goes in cycles.
Please let me know when this cycle is about to end and I’ll contact you then, to help us buy our first house.
You’ve given me some numbers from US, but not from Toronto. How much was the price increase in April compared to January or February? How much is now the median price in Toronto for a resale house?
Thanks again,
Ken
Here’s what I came back to him with…
Hi Ken,
Attached is a chart showing average increase in sale price since 1997.
Based on these moderate numbers, I’m saying that this cycle doesn’t have to end… there’s no reason for the market to retreat from values already set.
Worst case (or best case for you), I’m saying that price increases could moderate to zero and remain flat for a period of time. Therefore there’s no benefit to waiting since I presume you’re paying a landlord’s mortgage right now.
Thomas
Our Team lender even kicked in with his ‘two cents’ to say…
Ken , I am with TD Canada Trust and am a Mortgage Specialist with the bank.
Thomas asked me to provide you with some data that has been sent to us.
I think we may have met years ago, your name sounds familiar.
Both TD Economics & CMHC forecast real estate appreciating by 3-5% over the next 20 – 25 yrs.
That means property will double in value by then.
Our economy is going in the opposite direction than the US. Granted we are tied to many of their companies and they are our largest business partner but their economy and ours are so diverse that even if one sector or their economy slows, the other sectors will prosper.
Rates will probably rise later in 2007 , but nothing drastic.
Feel free to call with any questions.
George Christopoulos, TD Canada Trust
A Summary…
It is unfortunate but some people insist on trying to get the ‘absolute’ best deal out there and waiting until it comes along. Sometimes in life you just have to go for it and take the plunge. It is always absolutely better to be paying off your own mortgage, even if properties didn’t appreciate at all, rather than paying off your landlord’s mortgage.
Sure the stock market folks say "take that money you’ll save from not having a higher mortgage payment and invest it". First of all, NOBODY ever takes that money and invests it… plain and simple. Second, look at the Bank of Montreal’s stock advisers this week. They just lost over $450 million dollars on a ‘wrong turn’ in the market. Shows the ‘experts’ are often wrong about their picks.
At least with a home of your own, you’ve got something tangible that you have much more control over.
Don’t be a fence sitter yourself! Get out there and get informed, get educated, decide on who is the best buyer agent to represent you and make it happen!
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