Don’t Give Up On Real Estate
When I purchased my current home in the late summer of 2009, the market was still recovering from the financial crisis of 2008, but things were rapidly heating up. August is typically a slower month for home sales, and yet there were still two other offers competing with ours. Multiple offers were a relatively uncommon thing back then, and we were cautioned by concerned family and friends not to get emotional and end up paying too much for our house. Well, we did get emotional, and we did pay more than we intended for the house. But was it “too much”?
We offered well over the asking price right out of the gate, but we needed to improve the offer on the second round, so we threw in another $10,000…in addition to agreeing to adopt the owner’s elderly cat! We’ll never know what the other two offers were, or whether we needed to add that extra ten grand, but we got the house (and the cat). We paid more than we intended but still felt it was a fair price, and seven and a half years later, our home has tripled in value. This is obviously an incredible and unusual return on investment, but we didn’t buy it with an eye towards that. We bought our house because we loved it and wanted to live in it, and this is where I start the conversation with my clients in the current market conditions.
Are you buying a house because you fell in love with it and see yourself living in it for some time? Are you looking to buy something less expensive than what you currently own, so you can “cash out” in this strong market? Or are you an investor, wanting to find a property to either renovate quickly, or rent it out until it has appreciated further? These clients all have very different criteria, but the market concerns remain the same.
Historically speaking, the trend of Toronto’s housing prices has always moved upward over time, even when you account for market spikes and dips. Clients were already receiving dire warnings about the imminent “bubble burst” in Toronto’s market several years ago, but many purchased anyway. It did not turn out to be the high end of the market after all, and their homes increased in value by hundreds of thousands of dollars in the last few years. Some of these buyers have since chosen to sell for a profit, some chose to leverage their increased equity to purchase additional properties, and some chose to stay put and love their houses.
No one can predict how long the current boom will last, but Toronto’s population is continuing to grow, and as I like to put it, “they aren’t making more land”. Efforts are underway to increase densification with many new mid- and high-rise buildings and townhouse complexes, but condos are also in high demand and attracting competition. Even if it takes you six, seven, or more attempts before you are the winning bid on a home, and even if you end up paying a higher price than you perhaps expected (within reason, with professional guidance and research in hand), owning property is still a solid investment in my opinion.
So don’t be discouraged by the current market conditions as a buyer, because we are absolutely having success stories (we’ll have a new one on the blog next month). Even if the market softens, homeowners will have several options. You could sell your property at that time, rent it out to cover monthly expenses (since the rental market improves as the buyer demand decreases), or simply continue to live in the house that you bought because you love it, as I do, and over time the values trend upward. And don’t be scared to list your home, if that’s what you want to do, because with patience and effort we will find you an alternative.
In the meantime, you are paying down a mortgage and building equity in the property you’ve purchased, which puts money into your own pocket instead of someone else’s. That, in my mind, is always a smart financial move.