Personal Finance

Strategy for those priced out?

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  • Jun 7th, 2015 9:39 am
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[OP]
Sr. Member
Aug 6, 2014
830 posts
300 upvotes
Ottawa, ON

Strategy for those priced out?

Is there a 'best' option for this that most people accept?

In my case I can afford the average house ($400k) but it's slim pickings in ottawa at that price point, and if houses are appreciating 7-10%/year ($30k on the average house), that's something like an extra $1500-$2000/year in mortgage payments. It's unlikely that my salary will steadily increase $2000/year!

Options I've been looking at:

+ Continue to save and hope that prices decrease
+ Move to smaller town and look for work elsewhere
+ Buy crappy house that i can afford
+ Stretch myself and get something decent (I'm approved for a lot more than $400k but would have to actually live like a monk to make ends meet.)
+ Stretch myself and get a half-decent duplex and try my hand at being a landlord and pray I don't have to live like a monk or deal with *****ty tenants all day long.

I know rfd is full of house-rich millionaires with multiple dwellings, but surely there's one or two other people in my situation who have only recently been able to afford a house and missed the great glorious boom of the 2000s-2010s.
188 replies
Deal Addict
Dec 21, 2010
1750 posts
1058 upvotes
GTA
What if you looked for a crappy house that you can afford and do some DIY renos to turn it into a home that you want?

Or...

Look at smaller homes (semi, links, attached)

Or....

Increase your amortization period (this is totally dependant on what you're doing right now in your number crunching, of course)

Or....

Change your search parameters (ie 3 beds instead of 4 beds, 2 baths instead of 3 baths, unfinished bsmt, etc...)
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Deal Addict
User avatar
Feb 24, 2015
1032 posts
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Fort Mac, AB/Lambton…
fisher44 wrote: In my case I can afford the average house ($400k) but it's slim pickings in ottawa at that price point, and if houses are appreciating 7-10%/year ($30k on the average house), that's something like an extra $1500-$2000/year in mortgage payments. It's unlikely that my salary will steadily increase $2000/year!
You're a classic example of why home prices can only go up so much.

If your salary doesn't increase by that much a year, then you can't afford to buy at those higher prices. Assuming that most people's salaries won't increase by that much either, then who is going to be buying these homes at those higher prices?

Don't get me wrong. Now is still a good time to buy if you want a house to live in. In that light, every time is a good time to buy, unless you plan on moving again and again soon/frequently. But if you're buying for investment purposes...
Deal Fanatic
User avatar
Feb 7, 2008
5851 posts
771 upvotes
Ottawa
fisher44 wrote: Is there a 'best' option for this that most people accept?

In my case I can afford the average house ($400k) but it's slim pickings in ottawa at that price point, and if houses are appreciating 7-10%/year ($30k on the average house), that's something like an extra $1500-$2000/year in mortgage payments. It's unlikely that my salary will steadily increase $2000/year!

Options I've been looking at:

+ Continue to save and hope that prices decrease
+ Move to smaller town and look for work elsewhere
+ Buy crappy house that i can afford
+ Stretch myself and get something decent (I'm approved for a lot more than $400k but would have to actually live like a monk to make ends meet.)
+ Stretch myself and get a half-decent duplex and try my hand at being a landlord and pray I don't have to live like a monk or deal with *****ty tenants all day long.

I know rfd is full of house-rich millionaires with multiple dwellings, but surely there's one or two other people in my situation who have only recently been able to afford a house and missed the great glorious boom of the 2000s-2010s.
What are you talking about? 400k can buy you something pretty good as long as you are shopping in the outskirts. Barrhaven, Kanata and Orleans can get you 3-4 BR single with double garage for less than 400k.

And houses don't appreciate that much in Ottawa. We bought 2 years ago and our house is probably still worth what we paid for it. I would say minimal increase if at all in the past 2 years.
Deal Addict
User avatar
Feb 6, 2012
4936 posts
419 upvotes
Gloucester, Canada
fisher44 wrote: Is there a 'best' option for this that most people accept?

In my case I can afford the average house ($400k) but it's slim pickings in ottawa at that price point, and if houses are appreciating 7-10%/year ($30k on the average house), that's something like an extra $1500-$2000/year in mortgage payments. It's unlikely that my salary will steadily increase $2000/year!

Options I've been looking at:

+ Continue to save and hope that prices decrease
+ Move to smaller town and look for work elsewhere
+ Buy crappy house that i can afford
+ Stretch myself and get something decent (I'm approved for a lot more than $400k but would have to actually live like a monk to make ends meet.)
+ Stretch myself and get a half-decent duplex and try my hand at being a landlord and pray I don't have to live like a monk or deal with *****ty tenants all day long.

I know rfd is full of house-rich millionaires with multiple dwellings, but surely there's one or two other people in my situation who have only recently been able to afford a house and missed the great glorious boom of the 2000s-2010s.
what are you looking at? Single brand new home?? As someone stated, there are quite a few to choose from at the price of $400,000.

I personally would buy a house to can afford first (with the least amount of mortgage) and upgrade when I paid off the mortgage or when I can afford to do so. I think it is easier to upgrade later rather than trying to save to buy the house that out of reach
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Deal Fanatic
Oct 7, 2007
9277 posts
5105 upvotes
fisher44 wrote: Is there a 'best' option for this that most people accept?

In my case I can afford the average house ($400k) but it's slim pickings in ottawa at that price point, and if houses are appreciating 7-10%/year ($30k on the average house), that's something like an extra $1500-$2000/year in mortgage payments. It's unlikely that my salary will steadily increase $2000/year!

Options I've been looking at:

+ Continue to save and hope that prices decrease
+ Move to smaller town and look for work elsewhere
+ Buy crappy house that i can afford
+ Stretch myself and get something decent (I'm approved for a lot more than $400k but would have to actually live like a monk to make ends meet.)
+ Stretch myself and get a half-decent duplex and try my hand at being a landlord and pray I don't have to live like a monk or deal with *****ty tenants all day long.

I know rfd is full of house-rich millionaires with multiple dwellings, but surely there's one or two other people in my situation who have only recently been able to afford a house and missed the great glorious boom of the 2000s-2010s.
If you were in Vancouver, I'd say wait and give it less than a year. It seems to me that a lot of properties are getting listed (at least on the West side which is a pretty desirable place to live) and they're NOT selling. I'm thinking the simple explanation is that the sellers are asking too much. However, I also think that a lot of people who are selling may believe we are at the top and that might be why the market feels a bit flooded with properties right now. If one were to wait at this point, there is a significantly greater chance of the market moving downward than upward and with all of this talk about rising interest rates in the U.S., it is inevitable that the real estate market will be affected. In other words, if you have waited this long, DO NOT BUY NOW. I don't have a crystal ball, just common sense.
Deal Fanatic
User avatar
Apr 20, 2011
5310 posts
484 upvotes
Vancouver
loriblum wrote: What if you looked for a crappy house that you can afford and do some DIY renos to turn it into a home that you want?

Or...

Look at smaller homes (semi, links, attached)

Or....

Increase your amortization period (this is totally dependant on what you're doing right now in your number crunching, of course)

Or....

Change your search parameters (ie 3 beds instead of 4 beds, 2 baths instead of 3 baths, unfinished bsmt, etc...)
Yes. Many people are shocked when they are told that 35 year amortizations are still available with a conventional down payment. Further, there is no modern evidence that interest rates can spike to silly amounts. Having said that, for people concerned about a rate rise, both 10 year and 25 year closed mortgages are available for about 3.7 and 7%. Also the specific person looking to buy discuss as job, however, that does not mean salaried individuals are the only people that can buy.
Deal Addict
Apr 19, 2014
1042 posts
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popbottle wrote: Yes. Many people are shocked when they are told that 35 year amortizations are still available with a conventional down payment. Further, there is no modern evidence that interest rates can spike to silly amounts. Having said that, for people concerned about a rate rise, both 10 year and 25 year closed mortgages are available for about 3.7 and 7%. Also the specific person looking to buy discuss as job, however, that does not mean salaried individuals are the only people that can buy.
Horah! 35 years being a debt slave! BUY BUY BUY! STOP THINKING.

Also.. [..] interest rate spikes (pro tip.. the government raises interest rates not based on what realtors like you want, but what inflation is doing).. see interest rates in the 70's and 80's. With the massive amount of money printing globally, it's not completely insane to think inflation could spike
Deal Addict
Nov 27, 2007
3669 posts
807 upvotes
Canada housing boom is real, and will be there forever. You can't be priced out, there are 30yrs mortgages, get some down payment from mommy or daddy, keep it going. Don't worry about Jobs in Canada, our GDP is 12-15% real estate, let's keep it going. Oil is only 3%, why bother with this oil nonsense.

And remember your finance ministers' last week quote:

The minister said that the government is only monitoring the housing market and isn't concerned if the recent price gains are unsustainable.
Deal Fanatic
User avatar
Apr 20, 2011
5310 posts
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Vancouver
I never make vague references to things that happened a long time ago, not here, or on other boards. It is very amusing to think that interest has to go up. 35 year amortizations provide a more affordable monthly payment, and interest can easily be locked in for long periods of time if oneself believes rates will go up.
Deal Fanatic
User avatar
Apr 20, 2011
5310 posts
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Vancouver
For individuals concerned about their employment, some of the big 5 banks in Canada offer mortgage insurance that is job, not life based.
Deal Expert
User avatar
Nov 15, 2004
20621 posts
4354 upvotes
Toronto
fisher44 wrote: Is there a 'best' option for this that most people accept?

In my case I can afford the average house ($400k) but it's slim pickings in ottawa at that price point, and if houses are appreciating 7-10%/year ($30k on the average house), that's something like an extra $1500-$2000/year in mortgage payments. It's unlikely that my salary will steadily increase $2000/year!

Options I've been looking at:

+ Continue to save and hope that prices decrease
+ Move to smaller town and look for work elsewhere
+ Buy crappy house that i can afford
+ Stretch myself and get something decent (I'm approved for a lot more than $400k but would have to actually live like a monk to make ends meet.)
+ Stretch myself and get a half-decent duplex and try my hand at being a landlord and pray I don't have to live like a monk or deal with *****ty tenants all day long.

I know rfd is full of house-rich millionaires with multiple dwellings, but surely there's one or two other people in my situation who have only recently been able to afford a house and missed the great glorious boom of the 2000s-2010s.
Move to a medium-sized US city if you can and buy there. A coworker of mine bought a house, cash, in Austin for around half the price of an equivalent one here. That was 3 years ago, and prices here have grown even more insane while the US market has been relatively stable.
Deal Addict
Jul 22, 2014
2252 posts
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Ottawa, ON
Depending on your work location look in embrun, limoges, crysler, casselman. Pretty affordable and still a quick drive. I live in crysler, it's about 30-35 mins to work (bank and huntclub).
Penalty Box
Aug 11, 2005
4175 posts
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Piro21 wrote: Move to a medium-sized US city if you can and buy there. A coworker of mine bought a house, cash, in Austin for around half the price of an equivalent one here.
Housing in Texas is WAY cheaper and reasonable and in line with income. At least in the IT field, salaries are on par if not higher than salaries in Toronto, and a huge 3000 sqft home on a huge lot (several acres) will only cost 300-400k. With prices being so low, the homes are essentially TAX FREE. Also, no state income tax in Texas and lower property taxes that in Canada (especially Vancouver which has high property taxes). Homes there also have long warranties and Texas has some of the best Universities (with the most beautiful women) in the world. You can't even compare a third tier university like SFU or UBC to those in Texas (although the ones in Toronto are pretty good as well!).

If anyone can easily get a H1B visa, there would be nobody living in Toronto or Vancouver.
Sr. Member
Feb 8, 2015
622 posts
691 upvotes
Kanata
justaskthescientician wrote: You're a classic example of why home prices can only go up so much.

If your salary doesn't increase by that much a year, then you can't afford to buy at those higher prices. Assuming that most people's salaries won't increase by that much either, then who is going to be buying these homes at those higher prices?

Don't get me wrong. Now is still a good time to buy if you want a house to live in. In that light, every time is a good time to buy, unless you plan on moving again and again soon/frequently. But if you're buying for investment purposes...
I would say OP is a classic example of why homes won't crash below X amount.

If homes went below $400,000, then OP and plenty of others would immediately scoop up the home. Because clearly the demand is already there.

Law of demand and supply.

OP has already mentioned his demand is at $400,000, yet he is unable to get it at that price.


The only way for homes to crash is when people start making threads like "I don't care if homes crash to $200,000, I STILL won't buy!"
Deal Fanatic
Dec 5, 2009
5756 posts
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It's simple math. If you don't buy now you will have to buy for twice as much in as little as 5 years. Every second you wait you are being priced out further and further. You are basically flushing thousands of dollars down the toilet.
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Feb 24, 2015
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Fort Mac, AB/Lambton…
garmium wrote: I would say OP is a classic example of why homes won't crash below X amount.
And I definitely would not disagree with you.
Sr. Member
Feb 8, 2015
622 posts
691 upvotes
Kanata
Deep down, even the real estate bears in the forum really want to own a home.

For example, arkroyal, who is bearish on real estate, mentioned that he got an $800,000 mortgage pre-approval.

Are you telling me that, he spent a solid hour of his time discussing mortgages, bringing his paystub and preparing his credit outstanding documents, when he never wanted to buy a home?



Real estate will only crash when people don't want to own. Markets don't care about affordability. Markets care about demand and supply.
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Feb 24, 2015
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Fort Mac, AB/Lambton…
garmium wrote: Real estate will only crash when people don't want to own. Markets don't care about affordability. Markets care about demand and supply.
For the most part, that's true. Affordability only comes into the equation when it limits demand. If there are fewer people able to afford homes because prices are so high, then demand has decreased. So, in that case, yes, markets do care about affordability.

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