- Hey, welcome back.
It's Nolan Matthias
and today we are discussing on this Five Minute Friday,
Toronto's housing values
and the fact that they're nearing a million dollars
for the first time.
And I'm gonna talk about what you need to know
about buying in a hot market.
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- Okay, so let's get into it.
Let's discuss Toronto's real estate values
and the fact that they're nearing a million dollars.
Yes, that is Vancouver pricing for the Toronto market
and it is getting very, very near
from an average purchase price perspective
to that million dollar mark.
It is at $9,677,885 to be exact.
The benchmark price is slightly lower than that.
Remember from our last video
on the national housing market update,
the benchmark prices for a specific type of property,
so that you can see what's happening
when you measure values
from a consistent property type perspective.
Average housing prices is basically
all of the prices combined for the market in that month,
divided by the number of sales
and that gives you your average home price.
Average home prices can obviously be inflated or deflated
by a number of high value sales
or a number of low value sales.
And for the purposes of this video and the conversation
because Toronto Real Estate board
tends to use average price as their benchmark number,
and the media therefore does the same.
We're using average housing prices
for the purposes of our conversation.
So nearing a million dollars
and I got off the phone with a buddy of mine Matt McMullen,
amazing mortgage broker out in Toronto,
he was telling me yesterday about
the craziness in the market.
People buying a million dollar properties,
people listing them and saying,
hey, we're gonna list them today.
And you're gonna wait till next Monday to write an offer,
and trying to build basically a bidding war.
And then this thing that I'd never heard of until yesterday,
which is a bully offer,
where instead of waiting until Monday to present your offer,
you go into the seller, and you say,
hey, we're gonna write you an offer right now,
$500,000 over list price,
and you need to accept it by 11:00 pm,
or we're not gonna do the bidding war thing on Monday.
So absolutely interesting market
that's happening out in Toronto.
And that means a lot of people are having to write
conditional offers.
So in other words, no financing condition,
no home inspection condition,
which means you have to be a lot more careful,
you have to be really, really, really confident
that you're going to get fully approved on your mortgage.
And it's not something that we typically recommend,
we understand that it's a part of the market out there.
But you definitely need to make sure
that you're getting all your eyes dotted
and your T's crossed
when it comes to that purchase agreement
and when it comes to your pre approvals.
Now, if we go ahead and we take a look at the values,
the question is, is this a thing that's here to stay?
And what typically happens
in a market where things are really crazy is,
you end up seeing big run ups in prices,
bidding wars, all of those things,
it lasts a year to 18 months,
and then you see the market start to correct.
And how you figure out whether or not
the market is gonna correct
is you look at seller and buyer sentiment,
and you basically look at whether people
are still continuing to believe
that housing prices are gonna go up.
And what I like to use for that is Nanos Research.
They have a series of data that they use,
but the one that I like is
the future value of real estate data.
And basically, what they do is,
they survey 250 Canadians every single week.
And over the course of a month, that equals 1000 Canadians
and they asked them what they think is gonna happen
in certain parts of the economy.
In this case, we're looking at their real estate numbers.
And as you can see,
if you look back to May of 2020,
people weren't that confident
that real estate values are going to increase.
Well, you look at where they're at now,
and people are definitely confident
that real estate values are going to increase.
So this Toronto market
and the increase in prices is here to stay,
at least for the short term.
And when I say short term, I mean six to 12 months.
So you need to expect that you are going continue to pay
higher and higher prices
if you are waiting to get into the market.
Now the question is, do you wait and do you hope
that the market falls
and hopefully get a better value down the road?
Well, I wanna caution you
and I wanna make sure that you're careful
if you think that waiting a year or two,
and getting into the market later is a good strategy
because there are a lot of people
talking about this in 2018,
especially in the Toronto Real Estate Market,
you know, waiting for the market to come down.
I mean, there's one guy on the internet
who's been talking about the real estate market in Toronto
collapsing for the last 15 years.
He's still waiting.
He's also still using a picture from 15 years ago.
And you know, it becomes this conversation around,
do you really wanna wait
and then risk having to wait,
further into your retirement
until such time as your house is paid off?
So think about this way.
If you were to buy today in your 30 year old,
you're probably gonna have your house paid off by 25
if you do get some good mortgage planning advice,
oh, sorry,
you're probably gonna have your mortgage paid off by 55.
If you get some good mortgage planning advice,
you're probably gonna have it paid off by 50.
Now, if you wait two or three or four years
for housing prices to come down,
now you're looking at 55 to 60.
And you're basically extending
when you get to be mortgage free, further into the future.
And the other thing that you need to realize
about waiting for housing prices to fall is that
you may be waiting for housing prices to fall,
and you may actually miss out on an opportunity
to purchase a property for cheaper
than what you could buy it for a year or two down the road.
Because we don't know
where in this cycle we are purchasing, right?
We could be purchasing at the bottom of the run up,
we could be purchasing at the middle of the run up,
or we could be purchasing at the very top of the run up,
we don't know.
And there's a good chance
that if you were to buy property today,
so at this bottom green line,
that you will never see prices come back down
to where they are right now.
And if you are purchasing at the top,
you know, you may be paying a little bit more than you would
a year or two down the road.
However, the one thing I wanna point out,
and the one thing that people forget
is the long term picture,
because here's what it looks like 25 years down the road.
You see those four green lines
that were in the last screen?
Well, those four green lines,
25 years down the road are just a blip on the radar.
It literally doesn't matter
whether you bought at the bottom or the top of the market,
if you're buying for the long term
and planning on living in the property.
Now, if you're speculating
and you're just trying to make a quick buck,
whether you bought at the bottom
or whether you bought at the top of the market
really matters.
But if you're buying a property to live in long term,
and you know that you're gonna be in the housing market
for the next 25 years,
it doesn't matter whether you're at the bottom or the top,
even if values crashed by 50% 25 years from now,
you're still gonna be better off
than if you hadn't bought at all,
because guess what?
You're going to have a property that is completely paid off
versus the alternative, which is renting for 25 years.
And then you've got basically
a property that you're living in
that you paid a million dollar mortgage off on,
and no equity of your own.
So I think you really need to keep this in mind.
And if you keep in mind
that you're buying for the long term,
and that interest rates are the lowest
that you will likely see in your lifetime.
And that also factors into how much you pay long term
for over the life of your mortgage.
Well make the buying decision
not based on what you think is gonna happen in the market
and speculation but make it based on what your needs are
and what your housing needs are.
And also from the perspective of,
if you can qualify now
and you know that you can purchase a house now,
that at least you know you can do that
versus waiting and having prices go up
past the point of where you can afford them.
So that's the conversation that we're having today
with respect to housing prices, where they're going,
the real estate market being where it is in Toronto.
I firmly believe that
with interest rates as low as they are, yes,
a million dollars seems like it's a big number.
However, when you look at affordability,
when you look at the payments,
when you look at the actual cost of owning the home,
it's not that much different
than it was two or three years ago.
And that's primarily because interest rates are low
and payment costs are down.
And at the end of the day,
being in the real estate market
is something that long term always pays off.
And as long as you know that you're buying a house
that you can afford,
as long as you know you've got some savings
and the ability to weather a crash
or whether a poor economy,
then you are definitely making a good decision
by getting into the market.
Rather than waiting and hoping
the housing prices one day will come down
to where you think they are affordable.
So that's Five Minute Friday.
Hope you enjoyed it.
Do me a favor, hit that subscribe button,
hit that like button.
And please, please, please
don't forget about our race to 10,000 subscribers.
Somebody is gonna win their mortgage payment
or their monthly rent payment
and if you're in Toronto,
I'm reckoning that's a pretty good thing right now.
Will see on the next video.
Cheers.
♪ Mortgage bag ♪
♪ Are you ready now (indistinct) ♪
♪ Mortgage bag ♪
♪ No coming down (indistinct) ♪
♪ Mortgage bag ♪