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01.15.2021

If This Market Makes You Angry – You’re Not Alone!

Buying

It’s no secret that Hamilton home prices have been catapulted, somewhat unexpectedly, into the stratosphere of Toronto/Vancouver-esque valuations.

Actually, that’s a bit of an exaggeration.  At our last check-in, the average detached home in Toronto was at $1.2 million, and in Vancouver, $1.158 million.  Numbers like those make Hamilton’s $721,000 detached home look downright modest by comparison.   Still, a 25% year over year increase (average detached home last year in Hamilton was $576,700) is a shock to the system for many.  Especially is this so in a year as weird as this past one has been – when many expected the whole industry to crash.

 

No one is as offended by the spike in the value of local real estate than locals, it seems.

For anyone who has been trying to buy their first home, the frustration is palpable. Rising prices, low inventory, and aggressive bidding wars make it feel like there’s a housing ration that only the very wealthy can get.

Parents who want to see their grown children establish themselves, and buy a home of their own, worry that they will never be able to reach that goal.

Then there are also folks who just never imagined that Hamilton would become a city where it would be so hard to own property, and they miss the good old days.

Many want someone to blame:  Banks, for “keeping interest rates artificially low.”  Foreign investors, for “buying up the inventory at the expense of Canadians.”  Government, for not “doing something” to keep housing more affordable.  Realtors for “driving the prices up.”   Even HGTV takes a turn in the hot seat! (Not even making this up.)

 

How did this happen in Hamilton?

In terms of desirability, the real surprise is that it took until now for Hamilton to get noticed, in our opinion.   Located between Toronto and Niagara, with transit that connects to both places, Hamilton is in prime Golden Horseshoe territory.  Commuters to the GTA have the option of a GO bus/train or QEW access with HOV lanes for drivers.

Despite being an established urban centre  with industry, services, hospitals, and major schools – Hamilton has preserved the beauty of nature surrounding it.  Lake Ontario beaches, waterfalls, the Escarpment, and its many trails all offer respite to weary working residents during their off-hours.

For a long time, Hamilton real estate was way cheaper than the surrounding areas like Burlington, Oakville, Missisauga, and Toronto.  It’s almost as if the steel plants, so visible from the highway, protected the city from curious outsiders (and their money).   To state the obvious:  This is changing.

 

We are not alone

It’s important to note that this phenomenon is not unique to Hamilton, or Ontario, or even to Canada.  The United States is in the midst of a very similar housing boom.  Forecasts for them sound a lot like the ones for us.

Outside North America, as far away as New Zealand, housing markets are heading straight up – just like they are here.   In case you’re wondering, at the time of this writing, NZ currency is actually stronger than Canadian dollars.  Their cost of living is similar – while their interest rates on mortgage loans are slightly higher.  And their average house price (as of October 2020) was $725,000.

Other countries that are experiencing growth in the value of their real estate include as diverse a list as you can imagine: Germany, the Philippines, Turkey, and even Russia!

Clearly, the trend is bigger than any one person, group, influencer, or force.  The psychology of the effects of this pandemic will likely be a topic of discussion and debate for many years to come!

On a practical level, though, the question is:

 

What is a buyer to do?

The goal of home ownership and pride of place are firmly entrenched values for most Canadians.  It’s one thing to know, on a practical level, that prices are going up everywhere and are out of reach for many first-time buyers.  It’s another thing entirely to give up on a major life plan on which personal dreams are built.

Many people are understandably angry at being priced out of the market.  It can be disheartening to learn that what was once the price of a house is now barely a down payment.

Here are some of the options that recent buyers are choosing:

 

1. Relocate to a less expensive area

Depending on your situation, you may be able to consider one of Ontario’s more affordable markets.   Torontonians moving to Hamilton for this very reason drove much of the increase in demand in our city for what was, for them, much more ‘bang for their buck.’  There is also a huge spike in interest among Ontario buyers for real estate in the Maritimes.  Nova Scotia, for example, is in the middle of a boom – with an average sale price in October 2020 of just over $300 000!  If you are flexible enough to make a long-distance move, you could find excellent value in another province that suits your needs.

 

2. Adjust your expectations – even temporarily. 

If you are determined to invest in real estate right now, could you compromise on your list of must-haves? Would you give thought to a townhouse instead of a detached home?  A two-bedroom place instead of three?  A neighbourhood that is not your first choice? Or a home that needs some work?  Any of these options, though certainly not perfect, could allow you to build some equity – an important step on the road to owning the house you really want.

 

3. Share a home. 

We have seen some serious flexibility among determined buyers.  The traditional way of sharing, with a view to home ownership, is for grown children to move in with their financially well-established parents while they save toward a home of their own.  This is still an excellent way to build up, and lots of younger buyers take advantage of the option to do it.  When this isn’t possible, other buyers get creative and resourceful.  It is now quite popular to buy a home with an in-law suite or legal second suite to allow for two independent living spaces, and to rent one space out.   As with other options, there are pros and cons to this – and the appropriate due diligence is very important.  (We are always happy to discuss it with you, if you’d like some extra info.)  We have even seen sets of close friends, siblings, and business partners choose to buy a property together.  This allows them to combine their incomes for mortgage borrowing purposes, and to split the cost of carrying the place until they each can afford to go it alone.

 

4. Buy a small investment property first.

This is another “outside the box” solution that works for some.  It requires that you have 20% to put down on a property, since CMHC will not insure a mortgage unless it is your primary dwelling.  If your needs and your budget don’t yet match, and you can’t afford, for instance, the 3-bedroom home that you absolutely need, perhaps you can buy a 1-bedroom rental and have a tenant pay off the mortgage for you while you build equity.  You’ll need to educate yourself about what it means to be a Landlord and decide whether you are up to the task.

 

5. Wait out the superheated market

A roof over your head is an absolute necessity.  Owning the roof is not.  If you can’t (or won’t) relocate, but you want nothing to do with “overpaying,” bidding wars, or pricey real estate in general – rent a place you love and make it home.  The current conditions cannot last forever, although it’s anyone’s guess how long they actually will last.  Historically, real estate goes in cycles that include occasional dips.  Keep your finger on the pulse of the market, and watch for your opportunity!

 

Staying angry won’t help

As we have said many times, we are anxiously waiting for balance to return to our local markets so that we can offer better options to our buyer clients.  However, for the moment, we must work with the circumstances we have.

There are those who choose to focus and fixate on how “unfair” the current conditions are.  And, in their defense, the disparity between rich and poor, haves and have-nots, privileged and marginalized members of society can be completely infuriating.

However, sitting behind a keyboard and sending enraged messages to anyone who will listen does not get anyone closer to the goal of home ownership.  If you really want to get there, do what you can to prepare now.  Research early steps on the road to a home purchase.  Hone your budgeting skills.  Make connections to people on the inside of the industry who can tip you off to opportunities you might otherwise not know about.

Above all, take care of yourself and your family as best you can in these tough times – no matter where you choose to call home.

 

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