Should You Buy a Home in Toronto's Overheated Market Today?

Is it financially safe and worth making so many other sacrifices - like a long commute or living on a busy street - to get into the Toronto area housing market right now?

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Today, I'm adding to my response to reader Cristina's more specific question (see my post What Can I Get for 700K?), by returning to her more general question which I often get from many readers: "Should I even be buying a home in Toronto right now?"

If I was a first time buyer today, there are a lot of things I would personally be prepared to compromise on to buy a home because I have a strong bias for owning. I wouldn’t care too much about the condition the home is in, what it looks like on the inside or the outside. All of these can be changed over time, through slow investment and my own manual labour as funds allowed. I wouldn’t care if the home is very small, provided it is big enough for my needs today and for the next five to ten years. I would be fine buying a home on a busy street if the lower price helps me get into the right neighbourhood for me.  

If I could afford to buy a home that would be big enough for me over the longer term and is in a neighbourhood I want to live in, then I personally would buy a home. Not because I think this is the best time and not because I don’t believe prices will fall in the future as I believe they will, as they always do. What we don’t know is when and by how much — and this is why I advise others to not attempt to time the market. 

While it’s normal to be worried, the danger that so many experience in reality is that this delay in action equates to many years of living your life waiting rather than doing — and benefitting from — your ‘doing’. 

If prices fell six months after I bought, it would sting a bit (who likes to see their stocks or RRSP returns dip?), but I am always clear in my mind that I’m buying for the long-term so what matters is where prices are in ten years from now, not six to twelve months from now.

The rare exception is the need to be very cautious as a home buyer when we are seeing a rapid turn in the market that leads us to believe prices may be lower in the near future potentially affecting our ability to manage financially in the very short-term. In this video I walk through how we approached this in 2017.

Having said all this, if my maximum budget was $700K like Christina's (see video) and those of many highly impressive first-time buyers today, I personally wouldn’t be in a position to buy.  For me, where I live has a material impact on my happiness and I know I wouldn’t be able to afford a home that fits my needs and that is also in an urban part of Toronto for under $700K. And as much as I would prefer to own my home, moving to an area in the far reaches of Toronto’s suburban (or ‘905’ region) such as Clarington or Georgina would not be an option for me.

I wouldn’t be happy about renting, but I also wouldn’t be down about it either — because this situation would be out of my control and in no way a reflection of my commitment to buying a home because it takes a financially disciplined person to save a $140,000 down payment.   

When you’re a first time buyer on a $700K budget today, your fight to get into the market is not with your peers, other first-time buyers trying to do the same, but with the Bank of Canada and our federal government who are deliberately trying to inflate home prices to improve our economy over the short term.  

That’s a fight that no first time buyer can win.  

So in the meantime, I would tell Christina that if the fundamental needs for your life - a place for you and your family to gather in a place that you have the satisfaction of owning - could be met in a home in the outer reaches of the 905, do it - no matter what you peers think about moving that far out and how much the 'opportunity cost' of your commute would be, consider that a beneficial compromise for the quality of your life. 

But if a move that far out would exceed the day-to-day satisfaction of your life, what is enough to keep you at the hard work of your life, don't feel pressured to buy. Rent where you want to live, perhaps in an older building or house to minimize that outlay and invest as much of your income as you can in savings.

The Move Smartly Monthly Toronto Area Market Report is powered Realosophy Realty Inc. Brokerage, a residential real estate brokerage serving Toronto and the GTA. A leader in real estate analytics, Realosophy educates consumers at and and helps clients make better decisions when buying and selling a home.

Email report author John Pasalis, Realosophy President

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