At this time of year, people in Southern Ontario usually talk — ad nauseum — about the weather. This year, it’s real estate prices.
In a village store 90 minutes east of Toronto yesterday afternoon, a woman mentioned a small house in her neighborhood whose price had almost doubled in recent years.
“It’s unbelievable, what’s happening,” she said.
The house recently sold, after a bidding war, for $100,000 more than the asking price.
House prices in the Toronto area are crazy. And there’s a huge downside.
The prices of some homes have increased by a third in the last year alone.
It’s affecting the rental market too. Last week, I read that some Toronto landlords have nearly doubled their rents.
So I wonder: where’s the average person supposed to live?
Many families and single people are moving away — up to a couple hours’ drive away from their work — for affordable housing.
But that’s having an impact too. House prices were a lot lower in regions east, west and north of the city just a couple years ago. But the newcomers’ arrival in those regions has pushed up prices there too.
Last evening, at a small gathering roughly 2 hours from Toronto, the host seemed to still be in shock when he told visitors that two houses in the nearby village had recently sold for more than a million dollars. A few years ago, they would have been around $600, 000.
Foreign speculators, investing in Toronto’s real estate, were blamed for causing the huge increases. There oughta be a law, some people said. The government, fearing a real estate crash, now requires house buyers to have a 20% downpayment – or pay for very costly mortgage insurance.
If you’re well-off, that’s not a problem. But for first-time buyers, 20% is $140-thousand downpayment on a $700,000 dwelling… if you can find one.
No-one’s yet instituted a law against bidding wars. These fierce competitions bring an intense ‘auction fever’ to every house sale — the kind of panic that leads to foolish decisions. Many families today, after paying their mortgages, are barely making ends meet.
And now there are bidding wars in the rental market too.
So who benefits from these out-of-control price increases? Well, some sectors do.
- Sellers moving out of the region to a more affordable community.
- Realtors, whose percentage (5 or 6%) is usually fixed. That means huge increases for them when house prices explode.
- Some landlords.
- And government, through taxes.
But if you’re an average-income, would-be buyer (or renter), you’re scrood.
There outghta be a law.
33 thoughts on “When House Prices Go Crazy”
Ah Cynthia, it’s a problem here too. If people don’t have their own homes, they struggle to pay rent. If they do have a home, the downpayment/mortgage nearly bankrupts them. The idea/belief that everyone should have a decent, affordable place to live has been mangled by market forces, speculators, profiteers, politicians etc. Yes, there oughta be a law.
I hear you, Gallivanta. Thanks for commenting.
Yes, it’s very hard on people of modest means. Everywhere I’ve lived has had that kind of price pressure, though more modest increases and prices here in NW Arkansas.
Thanks, Brad. I guess if the economy is booming, house prices will too. But what we have here is crazy.
We have a similar situation in Ireland. My husband and I are both watching our younger siblings struggle to even enter the market while I can’t see how my children will ever manage to buy a home. Much worse, though, is that because rental prices have rocketed, we have a crisis of homelessness.Meanwhile, the cowboy property developers of the naughties are sipping cocktails in the South of Spain.
Same here. We see the housing anxiety of younger relatives. It’s so sad.
All of this would be ok if wages kept pace with prices.
It rarely does though — right?
You are so right, and this bubble should be taken seriously for a couple of reason. First, as you noted, when rents and mortgages skyrocket, where do people who aren’t affluent live? Second, when that bubble bursts, as bubbles inevitably do, the results aren’t pretty. In the U.S., we had our own mortgage “fun” in 2008. Not many laughs, I’ll tell you, as the taxpayers bailed out the financial system. Because there is another winner, at least in the United States, when mortgages go up and up—the financiers. In this country, Wall Street. Oh, the damage they’ve caused.
Yes, of course. How could I have forgotten the financiers? The biggest winners of all. And when the bubble bursts and people can no longer afford their homes, the financiers will be quick to repossess. Such a sad thing that happened in the U.S. in 2008.
The financiers wrecked a lot of people’s lives, and they didn’t have to pay for it with a single penny or any time in jail. In my next book, Library Lost, one of the villains is going to be a financier.
The same is happening here in Ireland in our larger cities, particularly Dublin. It is a mess, and low income families are the ones who really suffer. There are things the government can do but they seem incapable of thinking outside the box. Homes should be affordable for all, whether renting or buying..Surely it is a basic human right?
You’d think so. Thanks for commenting. Didn’t realize it was happening in Dublin too.
The same thing is happening here too. Since we’re a college town rents are especially high.
Ditto for out here on the west coast. Portland, Oregon is having particularly hard times. I feel very lucky to have this farm.
I too wonder how the majority of people will be able to live anywhere before long!!
I don’t know if you are familiar with the tiny house movement, but it has been growing, and may help alleviate financial constraints for many if zoning regulations can be modified to include them. Change often comes agonizingly slowly for those who need it most.
It has been going this way in the UK for many years now. In the 1950s my parents book a lovely, gracious Victorian country house for £5000. In the mid 1970s we bought a small detached village house (built c. 1908) for £27,000 an hour’s drive from London (where my husband worked). We were lucky and had both a garden and the means to extend the house over the years. Three years ago my daughters share-bought a leasehold ex-council flat in a council block (built 1970’s) in Hackney for around £250,000. Basically you have to be rich to live in London, or travel long distances (also expensive). The capital will soon run out of nurses, cleaners, bus drivers etc because they cannot afford to buy or rent and the queues for Council Houses and many years long.
You’re right, there oughta be a law.
This is such a sad and familiar story Cynthia, but as such a great post. Several years ago my dear old dad struggled to afford a retirement home in St Thomas, part of Toronto/London’s overspill – he was moving to be close to the young family from his lovely long term home and beautiful garden in Sault Ste Marie. Before that, a bit ironically, ten or so years ago we knew as incomers moving from London into the Wye Valley we were helping to outprice young locals …. I often think of my great grandmother who, according to family legend, lived very happily in the house in which she was born within a small rural village without venturing further than ten miles (on foot)! As per usual, you have touched a lot of our hearts.
It’s very similar here too Cynthia, there is a real crisis in affordable housing in many areas. Our house is relatively inexpensive – we would love to move but know that we couldn’t really afford it. And when I look at the rents, I can’t believe how much is charged – sometimes they’re higher than a mortgage.
Markets fluctuate so much. We bought our New England farm 20 years ago and sold it two years ago for half of what we spent on the house. What goes up eventually comes down but our timing never seems to be on the right side of things. The houses in our area of Florida have increased by 6% in the last year but nothing like what you are experiencing in your area. Our youngest daughter is single and rents…we had to cosign the lease for her to be able to get a one bedroom apartment. It is hard.
Scrood? so loving that and welcome to here. The whole thing is in another ten years the opposite will happen and those who bought will be scrood.
You get the prize, as the first person to reuse that word! (haha…) You make an excellent point. One just has to wait… 10 years or so.
I have been watching real estate down here for awhile. It takes care not to get scrood.
So interesting to read this Cynthia. My nephew over a 2 year period as a first time home buyer bid on 14 houses and could not buy a “dump” investment property Buffalo. He wanted a double so he could have the extra income to help and was willing to do the work to fix the place up himself. He had the mortgage commitment in hand and still was continuously outbid by $25-$125,000 on every house he tried to buy. Needless to say, he is back to renting as he just can’t compete with these large investment buyers who eventually turn in to “slumlords” and let the places fall apart. Sad for this next generation of families trying to buy their first homes.
It’s the same here in Ireland, Cynthia. Prices are climbing and rentals are scarce – and pricey.
The whole thing makes me sick. We sold our house 2 years ago because my husband is nearing retirement and the stairway to upstairs was getting to be too much for his aging legs. My stomach turns at what we would have got if we’d waited another two years, but my husband was worried the bubble was going to burst and we’d lose money. Who knew? We took our equity, invested it and rented a condo praying investments don’t tank so the interest can pay the rent. The fact is this city has been tainted by greed and it spread beyond. The government should have clamped down years ago when the foreign investors and buyers were buying up our homes and created the flips and bidding wars. There’s no chance for first time buyers anymore. The banks won’t be able to hold off raising rates forever, and when they do, they know they don’t want a repeat of the US crisis, but there will be collateral damage at some point.
Don’t get me started. Lived through the housing market crash a few years ago while married to a trader. Ouch. Yes, there should be laws. Unfortunately, in the U.S., no one seems honest enough to be qualified to make them.
I’ve wanted to comment on this post Cynthia. When it crashes, it will crash hard – sad to read how out of control it has gotten. RE agents are happy and so are the sellers, but these will end.
Not much “good” in the home market. I cannot imagine being a young adult with ambitions to own a home. I suspect that the law of economics (supply and demand) will settle out the situation. And, when that housing bubble bursts, the last buyer(s) will be left with the loss.