— We take our content seriously. This article was written by a real person at BREL.
Today, we’re sharing a story about Bill and John (not their real names). Their story plays out across Toronto and the GTA every day.
It’s a story about waiting.
It’s a story about FOMO (fear of missing out).
2 Years Ago:
Bill and John began their hunt for a house in Toronto with a budget of $900,000. Like many other Buyers, they were disappointed by the houses they could afford, intimidated by the speed of the market, and wondered if they should wait to buy. The weirdness of the post-mortgage-stress-test 2017 market was still fresh in their minds and they clung to the hope that maybe prices would fall. They went in and out of their house search, paying rent and watching their mortgage pre-approvals expire. They decided to wait.
Fast Forward 2 Years:
Bill and John can afford to buy even less house in Toronto today, and the neighbourhoods they love are out now of reach. Since they started their search 2 years ago:
- The average price of a detached house in Toronto increased by $86,000, to $1,369,848 in January 2020.
- The average condo price is now $135,000 more – an increase of 25%.
Like most Toronto professionals, Bill and John’s salaries increased during their home search break, but not by enough to bridge the gap. They didn’t miraculously win the lottery, or get a big inheritance either.
They saved an extra $30,000 in downpayment – which is great – but not enough to help them qualify for much more mortgage than they were pre-approved for in 2018. During the last 2 years, they continued to pay rent (which got more expensive) and their downpayment didn’t earn a ton of interest.
The quick start to Toronto’s 2020 real estate market is making them nervous too. They’re hearing about 20-person bidding wars and homes selling for hundreds of thousands of dollars more than the asking price.
They regret not buying two years ago.
They have FOMO.
What should they do next?
Bill and John’s Real Estate Options
Option 1: Expand their Toronto neighbourhood horizons.
With their budget, there are still some house options for them, but they’re even more underwhelming than 2 years ago and will mean living a lot further from their target neighbourhoods, in areas that are still relatively affordable and transitioning. The conveniences and lifestyle Bill and John were hoping to find outside their new doors are transitioning too, so everything is a little further and not quite as developed.
Related: 88 Questions to Ask When Choosing Your Next Neighbourhood
Option 2: Buy a condo or townhouse.
There are still lots of nice condo and townhouse options for them in their budget range. They had dreams of hosting their friends in their backyard, working in their garage and creating a garden, but they’re starting to realize that may not happen. BUT: buying a condo or townhouse would finally get Bill and John into the real estate market so they could start building equity and pay their own mortgage vs someone else’s.
Related: How to Buy a Condo
Option 3: Borrow money from John’s parents to increase their downpayment and budget.
This is tempting on many fronts, but as they say, banks don’t charge guilt and parents do.
Related: Buying a Home With Help From Mom & Dad
4. Increase their budget by deciding to pay higher monthly carrying costs.
Bill and John’s budget was always lower than what their bank was prepared to lend them, but they don’t love the trade-offs they’d have to make to pay the mortgage. They’ve always loved travelling and dining out and are hesitant to give that up.
5. Move to the burbs.
Bill hates this option, but some of their friends have started to move to Mississauga and Hamilton. Is this what they should do? How much of a lifestyle change are they prepared to make? Could they adjust to a longer commute?
Related: Should You Move to the ‘Burbs?
6. Wait and Pray.
This strategy has hurt them in the past 2 years. If they wait too long, they’re afraid they’ll get priced out of the condo market too.
What should Bill and John do?
There is no right answer.
Personally, I’ve always bought in neighbourhoods that weren’t ‘quite there’ yet. They’re more affordable and I enjoy the higher-than-average returns that come (over time) with living in a transitioning neighbourhood. I also love watching a community grow up around me.
I also lived in a townhouse for 8 years and absolutely loved the low-maintenance lifestyle that came with that.
I currently live in a house that was outside of my original budget and target neighbourhood. We fell in love with the house and have grown to love the neighbourhood. It’s been an excellent investment too, so we’re happy we stretched ourselves financially to get the house we wanted.
If there’s one thing that I’ve learned while working as a REALTOR for the last 12 years, it’s that:
..the best time to buy real estate was 5 years ago. The next best time to buy is now.
Waiting and hoping for prices to fall before getting into Toronto’s real estate market is expensive – there are financial costs and lifestyle costs.
We help people like Bill and John work through their personal situations all the time. Sometimes the right thing is to buy – and sometimes it’s not. There’s no easy answer.
