Parents, be warned, your kids are coming back.
In his October 2, 2012, article in the Globe and Mail, entitled “The right play for first-time home buyers”, Rob Carrick tries to convince parents their grown children should stay at home with them a few more years.
He belabours the point he tried to make in his August article which said in effect, first time buyers should continue renting in order to stash away money for a larger down payment (glad to see that in this article you threw in a little advice on how to buy rather than not to buy, Rob).
I’m confused though. Why is Rob so obsessed with keeping people from owning real estate sooner rather than later? Is it the massive 7+ percent average of yearly property appreciation, which Torontonians have enjoyed over the past 50 years?
Is it the historically low interest rates; should you wait for them to go up?
Or is it the steadily squeezing of the rules (they have already been tightened three times in as many years) that make it progressively harder for first time homebuyers? Shall we wait for them to get even tighter?
Oh wait, I’ve got it! I think he wants us to believe that immigration to Toronto (yearly between 55,000 and 100,000 people, depending on the year) will stop suddenly one day (and all those competing renters and home buyers will no longer influence the market), or will the massive volume of foreign capital stop flowing into the GTA where much of it goes into buying properties.
Will all these things that keep property values stable and rising, suddenly stop?
Come on, Rob, get real.
As he mentions in his article (and I’ve seen it myself as a Realtor), multiple offer situations are becoming more common in the Toronto rental market. It’s almost as hard to rent as it is to buy. What he seems to forget about renting can be summed up by a conversation I had last week with one of the students at my UofT course.
This student observed, “I understood that renting costs about the same as owning. If that’s true, then why do people rent?” She’s right.
In most cases, Tenants’ rent covers the Landlord’s mortgage, condo fees, and property taxes. In other words, you aren’t renting, you’re buying – but your landlord will wind up owning, not you.
There are two main reasons people rent instead of buy: One, they don’t have a down payment. Two, they think they know what will happen with the real estate market, so they’re waiting for a magical drop in prices so they can scoop up a deal. Good luck with that.
Rob suggests you lean on your parents.
He’s not completely wrong here. If you’re lucky enough to have parents who can assist you, then ask if they could support your buying a home now versus waiting several years for the unknown. Perhaps they have the means to help you should you run into a spot of trouble (job loss, interest rate increase, etc.). If you get a thumbs up, you could be off to the races (well, off to a trusted and knowledgeable Realtor, that is)!
But even if the parental units can’t offer financial help, you’re better off if you find something to buy. It may not be in the greatest neighbourhood, it may not be the home of your dreams. Whatever it is, it will be the first rung on the equity ladder. And you may wind up selling your first home in a very few years, but you’ll always remember how you loved your first home.
Trust the Toronto market; it won’t let you down. The best time to buy has always been now.
Rob: I can’t wait for your promised future column on the cost of owning a home. Please pull out a calculator first though, and consult the two sections in my book, which cover Appreciation, and Positive Leverage.