I have a fantasy that I’ve mentioned in this blog before: I dream of trading our very nice city home for a cute place to live in the country or in a small town that allows me, Matt and the girls to live mortgage-free.
Mathematically, it’s possible. I like to joke that my budding home equity is one of the reasons Matt married me; at 25 and single, I bought my first place, a loft conversion in an “up-and-coming” (read: slightly scary) Toronto neighbourhood that’s now very well-developed. Though I paid rent to my parents while living at home, I managed to build some savings and also started an RRSP as soon as I started working full-time. Much of that went to a down-payment on the place, which was a great deal at $115,900; my monthly mortgage and utilities payments were less than the rent on most apartments I’d checked out during the previous year.
Fast-forward a few years. Matt and I got married and decided to buy a semi-detached house in the east end. Three bedrooms, sort-of-finished basement: $280,000. I sold my loft at a nice profit for $219,000, so our new mortgage was tiny compared with the loans most of our friends were carrying on their first homes.
The same thing happened when we moved to our current house nearly five years ago — our “forever home,” or so I thought. It isn’t huge, but I have no desire to trade it in for something bigger (which would only mean more cleaning and higher heating bills). But, knowing the value of this place has increased along with the rest of the Toronto real estate market, I’m awfully tempted to sell here and move to a cheaper area, strategically buying a house that’s no more expensive than the amount we’d clear after paying off our mortgage and covering real estate fees and land-transfer taxes.
One family at our school has just done exactly that. The mom, who is on her own with two girls exactly the same age as Bronwyn and Isobel, found a job in a small city east of Toronto, bought a house (with a pool!) in a small town just outside the new city, and has sold her two-storey Toronto house for way, way more than she paid. She’s ecstatically happy to have a slower pace, to be closer to her extended family and to have less financial stress.
When I ran into her after first-day-of-school drop-off, she quipped, “You’re working freelance now — you could leave the city, too!”
Then I saw this article in today’s Globe and Mail. In a nutshell, Canadian home sales slowed noticeably between July and August — the largest decline in two years. And now the Canadian Real Estate Association is predicting fewer houses will be sold, and for less money, in the months ahead. What’s more, after years of growth, overall sales are expected to dip into negative territory in 2013.
Because we’ve owned our house through much of the crazy growth in real estate pricing, selling now (or next year) wouldn’t be a dumb move, exactly. But the downturn means we wouldn’t get the most, financially, out of moving to a less expensive community.
Now, moving to somewhere else in Toronto (or to other expensive markets, like Vancouver) — that would be a financially dumb move. Even if we downsized, much of the equity gains we’ve made just by sitting on our house and paying our bills would be absorbed by the new place. A home that cost $500,000 half a decade ago might be worth more than $800,000 now — but that also means buying something equivalent will cost you $800,000 and will likely require you to take on a bigger mortgage. If you buy something smaller, you’re probably looking at the same $500,000 you paid last time, so downsizing doesn’t put you much further ahead, money-wise. (Remember, you have to pay tens of thousands in land-transfer taxes and real estate fees, which will eat up any profit you make from selling your home.)
So, for now, I think we’re going to sit tight.
Have you been thinking about moving? Does today’s real estate news change your outlook at all?