Are We Inside a Housing Bubble?
I recently read an interesting article about the housing bubble and how it is affecting Toronto, as well as, areas in the GTA and farther. The struggle is real. People looking to buy in the red-hot market of Toronto is finding it difficult and, therefore, looking to places outside of the GTA for affordable housing. This means most homes go into multiple offer situations in and around the Guelph area. The result...homes are selling for way over asking in most cases. Below is the article from The Hamilton Spectator written by Howard Elliott. He brings forth some interesting questions that I'm sure most buyers have asked themselves:
"Living inside, or at least right beside, the "housing bubble" makes for interesting times and conversation.
But what do these skyrocketing house prices mean for real people in real life? Yes, the value of that house you paid $165,000, 30 years ago has grown exponentially. Maybe a place down the street from you, similar in size and vintage, just sold for $650,000. How's that for a tidy profit?
But how real is it? Yes, you might come out with hundreds of thousands in exchange for your home equity. But if you need a place to live, you're suddenly a buyer in a seller's market. You can rent, if that appeals. You can downsize, but you're still going to be paying a premium for that downsized new place. You can move out of the expensive city. But the suburbs are as bad or worse.
Time was you could transplant your family to Caledonia, Hagersville or Brantford. Or Grimsby, Smithville or Beamsville. But have you seen the house prices in those places lately? You're not gaining much ground over Hamilton. Maybe Nanticoke? Even in that relatively far-flung town, prices are getting prohibitive. Port Dover? Not much different. Then you have the cost of commuting.
The red-hot center of the housing bubble, Toronto, is driving GTA residents farther and farther afield to find affordable, decent housing. Those imports are adding extreme competition to an already competitive market where there is much more demand than supply.
Where does it all end? A bank economist has described the situation in Toronto, and neighboring cities (it's not clear if or to what extent that includes Hamilton) as "overheated … Perhaps dangerously so." In January, new listings in Toronto fell 17 percent from the previous month, an indication of how much demand is outpacing supply. Sales as a share of new listings, described as a gauge of how demand compares with supply, increased to a record 94 percent.
And what about first-time buyers looking to fight their way into the market? For most, Toronto isn't even an option. Hamilton may be, but it's getting tougher as well. Canadian Real Estate Association (CREA) chief economist Gregory Klump says potential buyers have to "drive until you qualify (for a mortgage)." He was referring to Toronto but that applies increasingly to Hamilton and neighboring communities. Is the boomer-era dream of home ownership becoming a thing of the past except for the most affluent? What does that mean for families and communities?
If you're lucky enough to own a house whose value has gone through the proverbial roof, good for you. But it's a long-term win for most, with minimal benefit in the short term. In any case slow and steady still seems the best advice, especially in this dizzying market."
Source: Howard Elliott - The Hamilton Spectator