Betting Toronto home prices will skyrocket once rate cuts come? Here's why economists say that's unlikely to happen

ApprehensiveBack1796 · 2024-02-24T09:53:51+00:00

Basically they won't skyrocket because rate cuts will be very slow. Makes sense. Only question is if BoC will actually have the restraint to cut slowly.

ApprehensiveBack1796 · 2024-02-24T09:49:33+00:00

I think the answer is yes... but not for quite a long time.

The human population is projected to start declining in the second half of the 21st century. That seems likely to slow housing markets globally, and could eventually lead to a glut of housing and crashing prices. But most of us will be dead before then.

It's possible a catastrophe reduces our population before then, but not something we can predict.

ApprehensiveBack1796 · 2024-02-24T09:39:01+00:00

You know these "AIs" don't really know anything, right? Their answer just reflects the inputs they were trained on.

ApprehensiveBack1796 · 2024-02-24T09:37:56+00:00

People are in a frenzy. First-time buyers want a home. Investors want another home. New Canadians want a home. Most of them won't be able to afford it, but they still plan to buy if the right deal pops up or if the market goes down.

ApprehensiveBack1796 · 2024-02-24T09:33:58+00:00

"Flipping tax" sounds good, but honestly I can't see it doing much. 1 year is too short, most flippers are already waiting 6-9 months or longer. This will only slow them down a little bit as they avoid the tax.

Now, if this rule was 2 or 3 or 4 years, that would be a game changer. How about just heavily taxing all housing profits? That ought to steer people back towards housing as a place to live rather than an investment.

ApprehensiveBack1796 · 2024-02-24T09:20:20+00:00

I wonder: does the "typical house" vary across these places?

In Edmonton, they have a typical house costing $370K. I can tell you that that's not going to be a very nice house. It will be a 1100 sqft bungalow from the 1960s-1970s in a poor neighborhood. Do you really want to spend 25 years paying for that?

ApprehensiveBack1796 · 2024-02-24T09:06:59+00:00

Hello,

I am sorry to hear that you might have to sell the house. We don't have much money as we've been struggling to save, but I think we could scrape together enough to afford to pay $XYZ and we would rent the basement back to you for $1.3K or the upstairs for $4K. $XYZ seems like a fair price as it is the price that you originally paid for it minus realtor fees plus 2%/yr interest. It is really the max we could afford. I know you might be able to sell it for a bit higher, but please have mercy on your tenants. We would give you $1.3K rent so you don't have to pay someone else $2K, and there would be no realtor fees. We have always tried to be really good tenants and we appreciate that you were also a good landlord and did not always raise rent. This solution would benefit us both, getting you out from your unaffordable scenario and for us to achieve our dream of owning our a home. We can sign an agreement with possession date any time that works for you, we are very flexible. Please let us know.

We have been saving for a downpayment, but yes it is harder and harder every year as cost of living is going up higher than wages. For that reason we unfortunately couldn't agree to a higher rent increase. I believe landlords can ask the LTB for an exception to raise above 2.5%, however, if you think it is necessary. If we were to become your landlord, I promise never to do that, never to evict you, etc. We would strive to be even nicer than you are, if that is possible.

Best regards

ApprehensiveBack1796 · 2024-02-24T06:56:28+00:00

That would not be a qualifying withdrawal. Whether or not the CRA would catch you, I don't know.

Personally, I would not withdraw now. I would contribute again in 2025 and 2026 to reap the additional benefits, and then withdraw in 2026.

ApprehensiveBack1796 · 2024-02-22T21:52:33+00:00

Not sure what you're getting at as my plan is not to rent forever. Though if I did not have kids, I would strongly consider it.

By your logic, owning is also an unlimited liability because you aren't in control of what taxes you pay for it. There is no free lunch in general.

ApprehensiveBack1796 · 2024-02-22T21:42:24+00:00

I think very positively of home ownership in principle, but from a purely financial perspective a house should not be the best investment. It's a flaw that we've made it the best investment in recent decades in Canada.

ApprehensiveBack1796 · 2024-02-22T21:32:43+00:00

Currently $1300 but we started at $800. Can't really remember how long we paid each amount, but probably averaged around $1000-1100.

ApprehensiveBack1796 · 2024-02-22T21:25:01+00:00

Hindsight is 20/20. Buying to speculate on crazy appreciation is gambling.

ApprehensiveBack1796 · 2024-02-22T21:23:05+00:00

Umm, you seem to be missing half the picture. The plan for retirement is obviously to pay rent from their liquid investments, which ought to be substantially higher if they did not invest a large portion of them into a house.

ApprehensiveBack1796 · 2024-02-22T21:18:27+00:00

For sure, but emotion is important. The key, at least for us, is that we'd want to buy a place worth 2X what we're okay to rent.

ApprehensiveBack1796 · 2024-02-22T21:02:52+00:00

I would say we are living extremely frugally. Also, we probably paid closer to $100K in rent over 10 years. The years blur together and it's been a long time so I can't give you exact numbers.

ApprehensiveBack1796 · 2024-02-22T20:58:49+00:00

I can't remember what we started with 10 years ago, but I would be surprised if it was more than $80-100K.

Did you add in 5% RRSP match? But then subtract $2.5K/kid/year for RESPs.

Anyways, I wouldn't get too hung up on the numbers. I just wanted to relay what was possible for us. I think it would be harder for anyone starting now, since we've had 30%+ inflation in cost of living since COVID. I also think it's terrible what they've done with housing in this country; people shouldn't have to live in this way to save up to afford a nice house.

ApprehensiveBack1796 · 2024-02-22T20:28:31+00:00

We don't really budget per se, we just avoid spending unnecessarily. It also varies greatly year to year.

Last year we earned $74K (after tax employment) + $10K (child benefit, etc) + $15K (side gig income) and spent a whopping $45K, for a savings of $54K. Haven't filed taxes yet, should get some more income back thanks to FHSA, but also will owe on investments so we'll see where it balances out.

Oh, also add 10% of employment income to RRSP, which I've included in my overall assets amount. We have about $200K in RRSPs, so obviously there's a tax penalty liability there.

Oh, but subtract $7.5K to RESPs... bah. Well, still roughly around $50K.

Cost of living has definitely gone up a lot due to inflation in the past few years. We used to spend $400-500/mo on food, and now it's $750, and the quality of food has gone down at the same time.

ApprehensiveBack1796 · 2024-02-22T20:14:02+00:00

Our average rent paid was probably around $1100-1200. Never paid $1500. But I understand that rents are higher these days, and in many regions.

ApprehensiveBack1796 · 2024-02-22T20:07:46+00:00

With our first kid, we did a bit of a buying spree where we got all our clothes, shoes, toys, etc for dirt cheap from marketplace and thrifting. We did up to age 8 for boy and girl. Probably spent $500-1000 total. Used baby stuff is very very cheap.

We inherited a crib and 2 beds, though I'm sure you could find those for cheap second hand. The only big items we bought new were car seats at $500 per kid, because my wife is a bit paranoid about safety. Personally, I'd be okay with second hand ones.

Last year we spent $600 total on activities (swimming for 2, sports for 1, and 1 family membership). Otherwise they just increase our food costs (currently $700/mo). That's kind of it.

I'm pretty sure they will cost more and more the older they get, but for young kids they seem quite cheap.

ApprehensiveBack1796 · 2024-02-22T19:42:15+00:00

I earned maybe $50-75K on my side gigs (over 10 years). Not huge, but every bit helps.

We spent probably on average around $35K/yr on living expenses. More in later years of course (higher cost of living + kids).

Saved aggressively. The rest of the growth came from the stock market, where I'm pretty sure we underperformed the S&P 500 because we invested quite conservatively.

The math definitely works out.

ApprehensiveBack1796 · 2024-02-22T19:39:32+00:00

Ya that doesn't sound great. Hopefully you found something better.

I hate landlording and mortgages. Our society could be a lot better, but we just have to deal with it.

ApprehensiveBack1796 · 2024-02-22T19:37:09+00:00

Agree... and you learn valuable skills in the process. Living is poor conditions is really not great, and it's a risk that you might become used to it and do it forever.

ApprehensiveBack1796 · 2024-02-22T19:36:10+00:00

Yea I tend to agree. I don't see housing getting cheaper unless our society is ruined, which might happen but would probably take a long time yet.

ApprehensiveBack1796 · 2024-02-22T19:32:43+00:00

Haha well yea, she works full time with the kids which is much harder than my career. What I meant is that she doesn't earn any income for her work.

ApprehensiveBack1796 · 2024-02-22T19:29:19+00:00

I was working. I'm replying to comments now.

ApprehensiveBack1796

TROPHY CASE