# Crazy real estate prices



## sags (May 15, 2010)

Yesterday the local news talked about average single family homes selling for $1.5 million or more in the GTA area.

Then they focused on how great a bargain our local prices of $750,000 are comparatively speaking.

But when they talked to a local mayor and realtors, they said that people who live in the community are already "priced out" and the sales are to people selling in the GTA and moving........and for them it is a bargain, but they have a 120 kilometer commute from hell to deal with, especially in the winter.

Our son is sending me real estate listings of these homes and I keep telling him.....you only earn $130K a year family income and it isn't enough.

It is a ridiculous situation that low interest has caused. Government created this mess.......and government has to fix it.


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## KaeJS (Sep 28, 2010)

It is a very ridiculous situation indeed. An issue that has been talked about ad nauseum, but one I still love talking about. Especially since nothing has been done.

Personally, I think our economy needs a break.
We need to limit immigration for a while.
We need to focus on building more dwellings.
We need to find a way to increase wages.
We need to stop foreign AND investment banking purchases of retail/residential real estate.

But who will listen? Who will implement?

In my opinion, house prices are only going to continue upward. 300k immigrants every year to Canada, and most of Canada is a cold place with little infrastructure. Everyone wants to live in Van, the GTA, or Calgary. 

Space is limited.


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## KaeJS (Sep 28, 2010)

Also... Not exactly sure where you live, sags. Not sure if you're willing to shed light on it. But I'm in the Kitchener/Waterloo area and townhouses here are going for 600-700k.


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## peterk (May 16, 2010)

KaeJS said:


> Personally, I think our economy needs a break.
> We need to limit immigration for a while.
> We need to focus on building more dwellings.
> We need to find a way to increase wages.
> ...


Nobody that we can vote for, that's for sure. Not a single one. Our governments and institutions are fully captured by financial and foreign interests -- have been since they killed JFK.


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## sags (May 15, 2010)

KaeJS said:


> Also... Not exactly sure where you live, sags. Not sure if you're willing to shed light on it. But I'm in the Kitchener/Waterloo area and townhouses here are going for 600-700k.


They were talking about Brantford on the news.......not exactly a mecca for anything, but it is Wayne Gretzky's home town. 

In our city of London......$750K will buy a nice home.


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## sags (May 15, 2010)

I agree none of the parties are even discussing what is needed.

After the war, during the baby boom........as in when the baby boomers were born in the biggest demographic bubble at the time, the government stepped up and started building subdivisions. Some cities serviced land and hired private modular home builders to sell homes there. Full subdivisions today are full of Alcan homes......and people would never know to look at them. They are all on concrete basements and were well made.

The homes at the time were 3 bedroom brick bungalows, or side splits. A few ranch styles were mixed in. They were all around 1000-1500 square feet.

Everybody had kids and they finished the basements themselves. Most of us teenagers spend our lives down in the family room in the basement. Add a couple bedrooms and a bath and it was plenty of room for everyone.

There is no desire or reason for home builders to erect those kinds of homes today. They make a lot more money building a two storey, double garage 3500 square foot home.

That is the key........massive building supported by government. Small homes on small lots, that can be finished in the basement or add an addition onto later.

Our parents used to say......buy a house for today and add on as you need to.

There is no reason that these types of homes couldn't sell for $250K or less today.

If people spend less on housing, they have more to spend on other things which is good for the economy.

If our parents had to spend most of their income on their mortgage or rent payment, Canada wouldn't have grown as it did.

From 1968......and those houses are still there in Woodstock today and look better than they ever did.

My sister actually owned one, and over the years they finished the basement with a bar and rec room, bathroom......added a sunroom on the back of the house and put in an inground pool.

It was a very nice home to raise their 3 kids.









Photostory #463: Aluminum Houses Rolling Off Production Line


Taking a futuristic, but solid approach to the urgent problem of housing Canada's growing millions, one of the nation's major aluminum companies has borrowed the production-line techniques of the automobile industry. Recently coming into production at Woodstock, Ontario, the Alcan Universal...




photostories.ca


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## sags (May 15, 2010)

The process for buying those homes was simple and straighforward.

You go to the sales office and meet with a sales agent. You look a couple of display models and pick one out. You pick a lot from the drawings. You sign for a mortgage......done.

The people who push back on such a concept are the following and it isn't difficult to figure out why they are opposed.

Land developers

Builders of homes

Real estate agents

Mortgage brokers

Real estate lawyers

Speculators

All of them want their "cut" of the action and that drives up the price with no benefit to the buyer who just wants a home.

When you buy a new home and have to feed all those people to do so.....no wonder it is so expensive.


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## peterk (May 16, 2010)

sags said:


> There is no reason that these types of homes couldn't sell for $250K or less today.
> 
> If people spend less on housing, they have more to spend on other things which is good for the economy.
> 
> ...


There's no reason they couldn't sell for less than $100k today! i.e. 1 year's salary for a moderately successful person. With all the productivity improvements in manufacturing of construction materials and methods, it would be easy.

Even the crazy unrealistic dreamers that want improvements for the middle class, can't even dream of a society/economy that's better and easier to live in than the 1960s... only as good as that was, or somewhat worse, despite the economy being 5x+ more productive.


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## sags (May 15, 2010)

As per the linked article.........they built each fully finished home in 20 days back in 1968.

With today's production technology they could roll off homes at a much faster rate.


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## ian (Jun 18, 2016)

Not every voter lives in the GTA or the Lower Mainland.


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## Mechanic (Oct 29, 2013)

I'm hearing almost a year now to get a house built, after choosing a lot (when/if available) Maybe they just like to drag out the build to justify the $350 per square ft. ?


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## Johnny199r (May 20, 2014)

The vast majority of jobs (at least well paying ones) are now in cities. Recent immigrants also tend to move to bigger cities, where their established communities are. Therefore, demand is only going to continue to rise, to live in big cities, as jobs continue to disappear in rural areas and youth migrate to cities.

Taking it further, many of these jobs are in the core of these cities. People do not want to sit in traffic all day, so oftentimes, it's more desirable to live centrally in a city, therefore, those prices are highest (This is reflected in most big cities around the world, location, location, location)

Increasing housing stock does not address that issue. The damage is done. Building a bunch of houses on the far outskirts of a city results in 2 hours commutes. Canadians are also clear they feel entitled to live in single family homes, and refuse to live in apartments like in other big cities (NYC, Paris etc).

What's the fix? Beats me. But I would never ever buy a house in Toronto or Vancouver when I could buy a house at a reasonable price somewhere like Calgary, Edmonton or Winnipeg (don't give me that B.S about how amazing Toronto is, it isnt. It gets cold in winter like the rest of Canada) And yes, there are lots of jobs in the cities I listed.

Everyone would prefer to live near family and friends, but that's the sacrifice sometimes. Many of us have made the sacrifice. Many people before us (immigrants to Canada throughout the last hundreds of years) sure made the sacrifice.


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## sags (May 15, 2010)

I doubt there are many affordable home options anywhere in Ontario.


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## martik777 (Jun 25, 2014)

sags said:


> That is the key........massive building supported by government. Small homes on small lots, that can be finished in the basement or add an addition onto later.
> 
> Our parents used to say......buy a house for today and add on as you need to.
> 
> ...


It's not the house size but the lot value is insane. Here in greater Vancouver an average lot is over 1M. My childhood home is Vancouver was on a tiny 33ft lot is now worth almost 2M, the house itself is assessed at <30k. I would be happy to split my 66ft wide lot into 2 or even a quad-plex but the neighbours would not support it. If someone tries to build over a certain height here, they almost riot because it will spoil their views.


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## Mortgage u/w (Feb 6, 2014)

Not sure why everyone is looking to "fix" the rise in house values. Values rise.....that's the evolution. You can't stop it or reset it without a major catalyst, which will bring on worse issues that people will complain about.

Let's talk about the price of apples - I've paid as low as $0.59/lbs......the norm today seems to be $1.99/lbs. I'm not a baby boomer if anyone is thinking that.....so I haven't been buying apples for that long. Why isn't anyone asking the government to fix that?

Point is there is a natural progression and increase in property values. If they would stay flat, why would anyone invest in them?

Low interest rates is the government's response to maintaining your property value and keeping the RE market active. Is there a better solution? Doesn't look like anyone has one.

Immigration needs to remain high. Our population is so little that we need new immigrants to increase government coffers. They create demand and increase spending. Why would you refuse more people contributing to the economy?

We have choices to make in life. Government did not oblige you to own multiple cars, cell phones, internet, cable, lattes, etc. So if you really want those luxuries, someone was smart about by finding ways to make you afford them. If then you can't afford a home, don't blame the government for it.


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## KaeJS (Sep 28, 2010)

Mortgage u/w said:


> Not sure why everyone is looking to "fix" the rise in house values. Values rise.....that's the evolution. You can't stop it or reset it without a major catalyst, which will bring on worse issues that people will complain about.
> 
> Let's talk about the price of apples - I've paid as low as $0.59/lbs......the norm today seems to be $1.99/lbs. I'm not a baby boomer if anyone is thinking that.....so I haven't been buying apples for that long. Why isn't anyone asking the government to fix that?
> 
> ...


I can't handle your post.

Do you understand money?

You are comparing an astronomical rise in leveraged assets with a much higher base price to a pound of unleveraged apples with a low initial cost.

And you don't think there is anything wrong with your analysis?

You could quite literally say you are comparing apples to oranges.


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## Mortgage u/w (Feb 6, 2014)

KaeJS said:


> I can't handle your post.
> 
> Do you understand money?
> 
> ...


Sure, my comparison is far fetched. Granted. Just trying to state the obvious that people are complaining to complain.

If you understand money that much more than myself, lets hear your solution.


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## nathan79 (Feb 21, 2011)

Maybe the price of apples is inconsequential to the average person, while the price of a house is not?

A "natural progression" would be for housing to increase at a slow and steady rate similar to inflation. Not by 30% a year. Who would buy property if the price stayed flat? Is that even a serious question? Gee, maybe people who want to live in it -- what a concept!

A house is only an investment if you're renting it out and generating cash flow. If you buy a house and don't live in it or rent it out, it's speculative asset. If you're renting it out and not generating cash flow, then you fail at investing.

Whose idea was it for the government to "maintain property values" as part of their mandate? And why shouldn't they have to take responsibility if their efforts to maintain those values cause prices to spiral out of control?

Maybe it's time to completely remove the federal government from the housing market, since they've proven their efforts to make housing affordable are a complete failure. Phase out CMHC, ban the BoC from purchasing mortgage bonds, and get rid of all first-time buyers programs.


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## Mortgage u/w (Feb 6, 2014)

nathan79 said:


> Maybe the price of apples is inconsequential to the average person, while the price of a house is not?
> 
> A "natural progression" would be for housing to increase at a slow and steady rate similar to inflation. Not by 30% a year. Who would buy property if the price stayed flat? Is that even a serious question? Gee, maybe people who want to live in it -- what a concept!
> 
> ...


There is a natural progression if you look at it over a long period of time. There are always abnormalities such the most recent increase which was caused by a lack of supply while the demand was still there. These abnormalities are short lived. Their followed by a plateau and eventually pick up again.

Government does not maintain property values. Values are dictated by supply and demand. Government mandate is to create affordable housing for everyone - and prevent a high rate of homelessness. Before CMHC, housing was becoming less affordable due to the high DP requirements. 

Phasing out CMHC and limiting BoC will cause a housing crash. Not sure you'd be interested then in investing in a property to live in without looking for alternatives first.


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## KaeJS (Sep 28, 2010)

Mortgage u/w said:


> Sure, my comparison is far fetched. Granted. Just trying to state the obvious that people are complaining to complain.
> 
> If you understand money that much more than myself, lets hear your solution.


You wouldn't like my solution.


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## nathan79 (Feb 21, 2011)

Mortgage u/w said:


> Government does not maintain property values. Values are dictated by supply and demand. Government mandate is to create affordable housing for everyone - and prevent a high rate of homelessness. Before CMHC, housing was becoming less affordable due to the high DP requirements.
> 
> Phasing out CMHC and limiting BoC will cause a housing crash. Not sure you'd be interested then in investing in a property to live in without looking for alternatives first.


Well, times change. What worked in the 70's doesn't necessarily work today. Housing is less affordable than ever and homelessness is at record highs, so whatever they are doing isn't working. That means it's time for some new ideas.

I'd welcome a housing crash. I'm not sure why people get so wrapped up in the value of their house. So what if the price goes down? I'm assuming you can afford your mortgage payment and put down a reasonable down payment. If not, I guess you're underwater and you just need to wait it out. Keep paying down the principal and eventually you'll be above water again, and the market will likely recover in time. Remember, it's not just your house that goes down in value, but all other houses as well. You might get less than you paid when you decide to sell, but you can also buy another for less, so it's a wash.


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## bgc_fan (Apr 5, 2009)

nathan79 said:


> A house is only an investment if you're renting it out and generating cash flow. If you buy a house and don't live in it or rent it out, it's speculative asset. If you're renting it out and not generating cash flow, then you fail at investing.
> 
> Whose idea was it for the government to "maintain property values" as part of their mandate? And why shouldn't they have to take responsibility if their efforts to maintain those values cause prices to spiral out of control?


So these points are related in a sense. A lot of people complain about the immigration aspect of the demand, which is kind of true, but most immigrants, unless wealthy when arriving are likely going to rent. We always talk about foreign buyers, but they are a low percentage (maybe 2 or 3 percent?) of the owners. That's quaint, how about 12-14% of homeowners in 3 urban areas secondary properties? More than one in ten homeowners in Canada's three largest urban centres owns multiple properties

The real issue are those buying multiple single homes for investment. I know lots of people who do that, and I'm sure some on the forum do the same. In fact, you talk to any real estate agent, and I bet that most own rental properties. We've been promoting real estate as the road to riches for the past decade or two, particularly with low interest rates and TV shows like Income Property or flipping/renovation shows. Or AirBnb where people just buy a bunch of condos to rent out for short term stay. Is it any wonder why the demand is so high relative to supply? It's not first-home buyers vs foreign buyers, it's first-home buyers vs income property buyers. But, given that there are so many people who have income properties, I bet any sort of housing price crash would cause many to become underwater overnight and that could be detrimental to the economy.

Of course, that's the unpopular reason for high prices, it's easier to blame foreign buyers because it's not us.


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## Money172375 (Jun 29, 2018)

All I know is that my first ft job paid 33,500 in 1999. We bought our first house for $315,000. That job now pays about 42,000 and that house costs $1million.


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## nobleea (Oct 11, 2013)

We sold our last house privately for 485. It sold a couple weeks ago for 525 net of realtor fees. That was almost exactly 5 years to the day. That's about 1.6% inflation.

They priced it low and could have got an extra 20K out of it, so maybe 2% annual inflation.


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## martik777 (Jun 25, 2014)

525k over asking since 2020 is normal here in the Vancouver area.

Whether our house is worth 500k or 5M makes no difference, we aren't moving unless we become incapacitated.


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## nathan79 (Feb 21, 2011)

My mom bought her house for 169,000 in 2003... today, similar houses in the neighbourhood sell for about $900,000... that's about a 9.7% annual growth rate over 18 years.


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## bgc_fan (Apr 5, 2009)

nathan79 said:


> My mom bought her house for 169,000 in 2003... today, similar houses in the neighbourhood sell for about $900,000... that's about a 9.7% annual growth rate over 18 years.


It's probably worth pointing out that real estate markets are really dependent on the city. So, in the case of my parents who bought a house in 1980 for $100k-ish, I think it is probably in the neighbourhood of $500-600k. Assuming $600k, that around 4%. Most of that due to the past few years in Ottawa. So if it wasn't for the fact that housing prices in Ottawa went crazy in the last few years, chances are, it was more around the 2% mark.


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## martik777 (Jun 25, 2014)

nathan79 said:


> My mom bought her house for 169,000 in 2003... today, similar houses in the neighbourhood sell for about $900,000... that's about a 9.7% annual growth rate over 18 years.


Grandparents bought in 1949 in Vancouver for 3,000, now 1.7M = 9.2% over 72 years


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## Mortgage u/w (Feb 6, 2014)

Money172375 said:


> All I know is that my first ft job paid 33,500 in 1999. We bought our first house for $315,000. That job now pays about 42,000 and that house costs $1million.


My dad's income in early 70's was about $10k and purchased his home for $37,500. What should have he said about your situation in 1999?

Back then, there was no question of using CMHC and you wanted to avoid a mortgage at all cost. Interest rates were very high and kept increasing. Private loans from family members were very common. The priority was to pay off debt as quickly as possible.

He bought his first car several years later, brand new for less than $5000. (half his salary). Took several years because he needed to save up to pay for the car. 

There were no cell phones back then (he still doesn't own one), no internet, no cable. Eating out was not an option. Hand-me-down clothing for the kids. Spending was limited and very frugal. 

I can't say that starting a family in the 60's-70's was any easier or more affordable that it is today. Different times, different challenges. Similar issues.


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## nathan79 (Feb 21, 2011)

At least you had the option of just saving up for a house back then and taking a much smaller mortgage. Nowadays, who can save up a million dollars for a house? No one really saves anymore because you just fall further behind the more time you spend saving. Down payments are either gifted or inherited. You'd be lucky to get a 200K mortgage with a 42K income. Hell, you'll need a 200K income if you want $1 million house.


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## MrBlackhill (Jun 10, 2020)

Solution spoiler (click): Do nothing


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