What’s old is new again. And what used to be young is now haulin’ in a mini-van. Sadly it’s all being set up for a rude awakening down the road.
Speaking of roads, the 401 is the country’s busiest highway, maybe even the globe’s worst freeway. In spots it’s twelve or sixteen lanes of honky, snarly, bitchy citizens with widly varying levels of driving skill and zero patience. Rush hour is every hour, except between 10 pm and 4 am. The relatively new 407 a few clicks to the north is a passable alternative, but not cheap. A brief 11-km trip can cost $4.50, which works out to $45 an hour.
Traveling into the 416 core from the depths of 905 can easily take sixty minutes by car, often considerably more. There’s always the GO train, but that ain’t cheap. A month of commuting from, say, Oakville to Toronto costs about $350.
So why would people move from where their jobs are to the hinterland, full of coyotes, weasels and desperate cougars? Just for the cheaper houses?
Well, forget that. While the average price of a detached house in Toronto has barely budged over the past six months (in the $1.2-$1.3 million range), the suburbs have gone nuts. The average detached digs in the 905 wilderness sells for just a hair under $950,000 – a stunning increase of 29% in the past year. And the disease is widespread. Houses in both Halton and Peel are up 21% year/year. In York, it’s a 27% gain, edging out Durham at 25%. Even in Orangeville and Simcoe Country, where people wear winter hats with flaps and drive trucks, the gains are 23% and 26% respectively.
It doesn’t stop there. Hamilton prices have been among the rompiest in the nation for the last two years, and even down into the Niagara Peninsula, where the locals are hammered on ice wine half the time, any property priced under a million is gone in days. Sometimes hours. “We just don’t know how to price things anymore,” one realtor told me. “This is beyond bizarre for this area.”
Despite the brutal commute, the expense of travel, the deadening ennui of living on a street with people just like you, baby trees and a Winners-Staples-Best Buy-WalMart- Home Depot big box plaza every few blocks, the burbs are hot. And not just around Toronto, of course. The same has happened outside the borders of urban Vancouver, with Burnaby, Richmond, Surrey, Langley and other cultural, retail-infested soulless hellholes swamped with buyers happy to push prices skyward. (Until the last few months, of course.)
The phenom has resulted from a limited supply of detached houses on the market in the cities, facing sustained demand by people who would rather pay a bunch more than spend much of their adult lives looking at taillights. Unable to afford the core, turned off by bidding wars or unwilling to wait any longer, young buyers have migrated outward, bringing city prices to the burbs. This has happened despite demographics. With Millennials now outnumbering Boomers, the common wisdom was that suburbia would slowly croak since the latte-sipping, vaping, Vespa crowd overwhelmingly favours urban life.
But that’s changing fast. Go for a drive to north Brampton, for example, and see miles after mile of new developments where detached houses start at $800,000 and easily rise through a million, being snapped up at sales centres by scruffy kids in whiskers and kneeless jeans. If they could buy downtown for five hundred more, they would. But buy, they must. So they suck it up and go suburban.
It’s probably a really bad idea. Not just because the places they’re purchasing are made of glue, particle board and fake bricks, but because they’re paying extreme prices at what’s likely the moment of peak house. There’s just so much wrong with a real estate purchase at this juncture, it’s hard to keep up. The mortgage changes announced at the beginning of October will have a substantial bite to both sales and prices. TD has launched the next round of mortgage increases as a result. By this time next year mortgage insurance will be more costly and less available. The US Fed is four weeks away from resuming its normalization of rates, starting a process which Canada cannot avoid. And our economy sucks so much the feds have to spend $80 billion they don’t have so people can dig holes and build bridges. And more commuter rail lines into the hub.
Hey, I didn’t even mention Trump.
The point is simple. If you’re going to fork over a million, do you really want a cookie-cutter box on a long curvy, boring street where you can’t walk to buy milk?
Here’s a better strategy. Rent. Wait. What’s coming will change it all.