Real Estate 'Chaos' Sends Millennials Scrambling Before They're Priced Out
Monday Apr 18th, 2016
REAL ESTATE 'CHAOS' SENDS MILLENNIALS SCRAMBLING BEFORE THEY'RE PRICED OUT
The modest house in west Toronto wasn't their ideal starter home, but with a little compromise, it was close enough. Besides, it has a newly renovated kitchen and there was a daycare centre right around the corner.
The semi-detached was listed for an enticing $649,000 in a neighbourhood where 30-year-old Elia Briganti grew up, where much of her family still lives and where she'd like to raise her 18-month-old daughter.
Feeling intense pressure to get out of their condo and armed with a $700,000 budget, Briganti and her husband put in what they thought was a solid offer.
But the couple got an ugly initiation into what one realtor calls the "organized chaos" of the city's real estate battlefrield: In just days, a bidding war drove up the price another $100,000. They had to surrender.
"It was eye-opening, and frustrating that this market is forcing us out of this area, where our roots are. This is my city, I love it," says Briganti.
"My husband and I work hard, and I thought we had a great income. But when it comes to real estate, it doesn't seem to matter."
That exasperation resonates throughout a generation scrambling to put down roots before the dream of owning a house in the city - or even somewhere close to it - is completely out of reach.
"We feel this real urgency to get into the market now because we can't save fast enough compared to how quickly prices are going up," says Briganti. "It's always at the back of my mind."
Not the only ones.
Her anxiety is not misplaced. The average price of a detached home in Toronto is now nearly $1.2-million, and a semi-detached costs more than $800,000. Further, about 71.4% of household income is needed to cover the costs of the average family home in the city.
The surge in prices might slow this year, but it doesn't look like a market correction is coming any time soon. Demand is still sky-high; the first quarter of this year set sales records in the city - and supply is dwindling. There's no telling when house prices will level off. It's making the bulls even more bullish and those who may have been bearish before are definitely coming around.
In response, some first-time buyers are taking on dangerously high debt loads. Without a hefty capital infusion from the so-called "bank of mom and dad," it's sometimes the only option. Others are being forced to move further and further from the city.
Having already sold their condo and being determined to stay in their preferred neighbourhood, Briganti and her family will likely have no option than to move in with her parents. That way they can grow the war chest as quickly as possible and keep searching.
"I have other friends who are living with their families, in their parents' homes, because they just can't afford to get into the market," Briganti says.
"There's a bit of comfort in the fact that we're obviously not the only ones."
Sky-high prices consuming GTA.
Their experience is not unique among would-be buyers trying to navigate the city's ruthless real estate scene. A common compromise has been to move farther from the downtown core, but even that is becoming untenable for many buyers.
Jean-Charles Mercedat, 30, and his wife, 29, have been hoping to move from their northwest Toronto apartment for nearly two years.
They're both engineers and make the brutal commute to their jobs in Markham - a GTA suburb northeast of the city - every day. On a good day, that means 90 minutes each way on Canada's busiest road, Highway 401.
The couple thought buying closer to work would be achievable, but they're now facing the harsh reality that price increases in the GTA are outpacing those in so-called Old Toronto. "I just never imagined it would be this difficult to buy a home," says Mercedat. "We have good salaries, but they're obviously not going up proportionally to house prices."
To add debt or not to add debt, that is the question.
They're facing an uncomfortable choice: save 'aggressively' for the next year or so and hope to come out with enough to land a house, or try to get a loan to break into the market now and go deeper into debt (they're still paying off student debt from university). On top of a mortgage, it could be crippling.
"It's not a great option, but honestly, we'd be willing to do it if we found a place that we really liked. Competition is so fierce and prices keep going up, so at some point we might just have to do it," Mercedat says.
The couple has, for the time being, tempered their expectations. They started looking for a detached house with "at least three bedrooms," Mercedat says, but now they'd settle for a townhouse.
The most affordable option would be a condo, but they, like many in their generation, aspire to own a home.
"It's sad to say, but I'm almost hoping the market crashes," he says, only half-jokingly. "Maybe then we could buy the house we want."
Don't hold your breath.