Is the glare of Toronto’s real estate market blinding us to a darker future?

Blinding glare of Toronto’s real estate market
Toronto’s real estate market looks bright for investors, and we all see exciting dollar signs when neighbours’ homes sell for double. With the market showing no signs of slowing down, what does this mean for our children’s chances of owning a home in the GTA?

Like a moth to a flame, Toronto’s shining real estate sector has twice managed to attract my wife and I, prompting us to buy — then buy again — caught up both times in the glow of the market.

With the encouragement of friends and family, who were equally transfixed by the glare of a gleaming market, we bought a house just beyond what we could afford, our judgement coloured by the near unanimous assumption the house’s “value” would continue to grow. Then we did the same thing a second time.

In early 2001, we took the first step in our climb towards the Canadian dream, with the purchase of a starter home. Back then, like for generations before us, the plan was to get into the property market, buy a small house in need of repairs, build equity, save like Scrooge and plan for the day our “forever home” presented itself.

Several years later — and with a new and generous mortgage from the bank — we were able to trade up and settle into the house of our dreams.

The bravery and confidence we showed to buy that home in the mid-2000s nearly paralyzed me with fear at the time, and still amazes me. But we were young, we were optimistic and we were living the same dream as so many others in our generation.

Little did I realize that despite the glow of the market, ours could very well be the last generation to bask in the light of the Toronto real estate dream. The last generation to believe in the starter home, and the last generation for whom home ownership would be within reach.

Why? Well let’s look at what’s happened on my street since we bought our forever home, as an example.

Last year, a similar house to ours sold for more than double what we paid, less than a decade before. Last week, the house across the street, although recently refinished, managed to sell for even more — a lot more.

Suddenly, in the blink of an eye, our home has become the cheapest on the block, and we’re cognizant of the irony that we’re living on a street we can no longer afford.

But we’re in — albeit with a huge mortgage — and we’re living our dream.

Too bad the same dream may be out of reach in the future for our children, and the generations that will follow.
How can it not be?

How can any member of the millennial generation today realistically foresee home ownership in their future? Forget a starter home, how will these kids ever be able to afford to buy any home at all?

Experts suggest that we are not experiencing a real estate bubble and that market fundamentals are strong, even as average home prices this year are expected to reach $825,000.

Let me repeat that: the average home in Toronto this year is expected to cost $825,000! And experts are suggesting that prices should still rise even higher.

So, if all the real estate experts are right and there’s no crash or market correction coming, just what will slow the market’s steep trajectory? What will soften the sharp point of the pricing spike?

The federal government? The banks? Realtors? Common sense?

How about none of the above? In fact, there’s nothing to suggest a slowdown in home prices is on its way.

So for those of us who have already entered the real estate market and get a warm and tingly sensation with every bidding war and over-asking offer on the block, perhaps we should pause and stop celebrating quite so much. Perhaps we shouldn’t be so excited to watch the houses on the street trade for hundreds of thousands more with each transaction.

Perhaps it’s time to think about what current housing statistics mean to future home buyers.

What it means for our children.

Like many in my generation, I have enjoyed the warm glow of the rising market, with little regard for the darker, colder market we are creating for the next generation. I’ve cheered the price increases on my street, and celebrated the theoretical boost to my bottom line.

But, I’m left wondering, if the glare of today’s market has blinded me to the realities of tomorrow.

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