June 24, 2010

Homeowners Staying out of Real Estate Market After Selling

CANADA - Bad news for renters out there, there is a growing percentage of homeowners who are selling their houses and starting to rent, which is causing the cost of renting to go up due to increased competition.

I blame the Baby Boomers.

According to people in the Canada's real estate industry more Canadians (especially older Canadians) are selling their home and bidding on rentals, choosing to avoid the real estate market.

Part of this probably has something to do with the collapse of America's Housing and Mortgage Industry. Some of these former homeowners are apparently waiting around for home prices to drop so they can wade back into the market and snatch up a home at a good price.

While people in the Toronto real estate market twiddle their thumbs people like myself (aka renters) are also looking to buy a home in Toronto. Honestly I can't see the prices going down very much, not when there's always lots of renters looking to make a change to owning. (Or at least mortgaging, if thats a word.)

Bidding wars over a two-bedroom apartment seems silly to me. Bidding on a condo makes more sense. (Cuz renting is for suckas!) For the owners who managed to cash out at the height (or peak) of the market and put their money in the bank in theory they could be doing quite well if interest rates were higher... except they're not, interests rates right now are dirt cheap.

BUT interest rates are going up in Canada as the economy picks up. That makes renting better and getting a mortgage/buying a house more expensive. As the economy continues to grow the Bank of Canada will no doubt hike interest rates more, gouging us wee consumers and making it more impossible for renters to finally buy their first home.

(Its makes a person very tempted to move to Newfoundland and buy land there...)

Earlier today I was cycling near Moore Park (I had a picnic in Moorevale Park) and I remember thinking "Wow, there's a lot of nice houses in this neighbourhood." But if interest rates keep going up I can pretty much guarantee I won't be able to afford them.

My advice to old people who are selling their homes: BUY A CONDO! Stop stealing all the rentals from young people who are struggling with university or university debt!

As these new renters look for temporary homes (either to retire or because they're fleeing the real estate market temporarily), they are driving up prices and engaging in bidding wars to ensure they get a place that is comparable to the property they just sold. (Because they likely have a lot of belongings to put in storage.)

And some of these properties are quite upscale. There are apparently idiots out there who are selling $3-million homes and opting to rent. Not just in Toronto, but also in Vancouver as well. What are these morons thinking?

Vacancy rates in Toronto and Vancouver are now some of the lowest in Canada, a mere 2.2% in Toronto and 2.7% in Vancouver as of May 2010.

Part of this is due to what I'd call market panic (and the other part is what I'd call just plain stupidity). You see what happened was the real estate market was cooling and a number of TD Bank and CIBC market economists have predicted that home prices in Toronto might drop 10% in the next 2 years. Thus if you bought an $800,000 house now by June 2012 it would only be worth $720,000. All this based on a few economists (which are frequently as wrong as the weather guy) and a few silly people are now panicking, thinking they should sell now... rent a place for two years, and then buy a new place that is "10% off".

Its a complete and utter gamble. Its just as likely that housing prices will go up 10% in the next two years and these morons will have basically lost $80,000 + whatever they paid in rent for those two years. If they spent $36,000 on rent over a 2 year period you begin to realize their gamble approaches on the idiotic.

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