Million Dollar Property
According to a local realtor who left an advert in my mailbox this week, I live in a ‘Million Dollar Neighbourhood’. I can’t dispute his claim – there’s a house across the street (three doors up) that is currently listed for $1,099,000; another one a block further up that recently sold for just over $1,200,000; and one on the first cross street north of me that was advertised a few months ago at $1,250,000 (it sold within a week, so I assume they got close to the asking price). There are also three brand new homes just a few blocks away with price tags of $1,349,000, $1,375,000 and $1,995,000 (all were built on lots where older, smaller homes had previously stood – it’s becoming ‘de rigueur’ in many ‘well to do’ southern Ontario communities to tear down older homes and build ‘monster homes’ in their place.) Personally, I can’t see how any of these properties are worth that kind of money!
We knew when we bought here (13 years ago) that this was a ‘desirable’ neighbourhood – that houses sold quickly and at prices slightly higher than elsewhere in town. But my son wanted to attend the local high school, so we kept our search to this particular part of town (we’d previously lived in a subdivision in the north end of the city). It’s a ‘mature’ neighbourhood with a broad mix of house styles (everything from stately Victorians and early twentieth century farmhouses to quaint cottage style homes and modern bungalows) on generous, well-treed lots.
We’re close to most amenities (library, grocery stores, restaurants, banks, etc.), and the marketing types would tell you that we’re ‘within walking distance’ of the city’s acclaimed lakefront park and downtown shopping district (although it’s an-almost two mile hike, and you have to go under the highway and along a stretch of less-than-attractive roadway to get there). In addition, we’re ‘very close to’ the ritzy (>$10,000 to join) local golf and country club (you can see one of the fairways from my back deck, but the whole thing is fenced off so no one but members can get in) and the uber-expensive ‘Northshore’ community (about a mile south of us, the homes there overlook – or are within spitting distance of – the lake; there’s one ‘estate’ currently listed for sale at $4.5 million. I particularly like going for a walks in that area, because it’s relatively quiet and shady – and I figure if I get taken out by a car going just a little too fast on the curvy, undulating roadway, at least I’ll go down with a Mercedes or Audi logo embedded in my backside!)
Still, most of the homes in a six to eight block radius of where I live are ‘typical’ three or four bedroom bungalow, ranch, raised ranch or split level style homes – nothing spectacular, nothing ostentatious, nothing that screams ‘RICH PEOPLE LIVE HERE!’ Don’t get me wrong – I love my house and the area I live in, and if someone wants to give me three times what I paid for my house a dozen years ago, I’m not going to argue, but I simply don’t understand how house prices here (and in many other areas) have escalated to the point they’re at (homes in our neighbourhood generally sell for $550,000 and up), considering today’s economic climate.
I understand supply and demand (there are more buyers [demand] than houses available [supply] so prices rise). And I ‘get’ the marketing angle as well (people want to live in ‘desirable’ neighbourhoods, close to shops and services, and in proximity to the kind of people they aspire to be – like those who live in the Northshore area). But the numbers simply don’t make sense. Our city has a population of about 180,000; the average family income (according to Statistics Canada) is $86,000; there are (about) 70,000 ‘dwelling units’ in the city – 54% are single family homes, 22% are semi-detached or townhouses, the rest are condominiums (there are less than 5,000 rental units in the city). In May (2013), the average sale price of a home (according to the local Realtor’s Association) was $423,542 (an increase of 12.2% over May 2012).
In order to buy a million dollar house (in Ontario), you are required to make a minimum down payment of 20% ($200,000). Assuming you had access to that kind of cash, you would (still) need an annual (family) income of at least $250,000 to qualify for a mortgage (in Canada, if you earn more than $230,000, you’re among the top earning ‘1%’). Mortgage payments alone (i.e., not including property taxes, insurance, utilities, etc.) would be somewhere around $5,000 a month (assuming a 25 year term at current interest rates). I suppose – if 1% of our citizens actually DO earn that kind of money – there could conceivably be 1,800 people who could afford one of the 85 or so homes currently listed (through our local Multiple Listing Service) between $1,000,000 and $7,000,000 (about half of those listings are between $1 and $1.5 million; a dozen of them exceed $3 million).
The asking price for the cheapest single family house for sale in my immediate neighbourhood right now is $535,000. With (the required minimum) 5% down ($26,750), you’d have to have a combined family income of (approximately) $155,000 to qualify to buy it (monthly mortgage payments would run you about $3,300 – and things like taxes, utilities, etc. are going to drain at least that much again from your bank account).
Considering the ‘average household income’ in our city is just $86,000, I can’t fathom how the ‘average’ (never mind the ‘below average’) couple will ever be able to buy a house here (at an average selling price of >$400,000, you’d need to earn at least $120,000 a year to afford to buy; $86,000 in income and $12,000 in the bank would get a couple no more than a $212,000 house – and there are only three townhouses and two [high rise] condos currently for sale in that price range!).
If we take into account the fact that the majority of people in Canada are up to their ears in debt (we have a 165% debt to income ratio – i.e., people owe $1.65 for every $1.00 in AFTER TAX income they bring home), that heat and hydro and telephone and cable and clothes and insurance and car payments and food prices are all escalating out of control – where will the next generation of home buyers come from? (Granted, immigration is on the upswing and many homebuyers are newly arrived in Canada, but even they have to earn a living – and our wages don’t ‘equate’ to our house prices.) I worry about how our own children (i.e, MY 27 and 32 year olds) will ever get a foothold on even the bottom rung of the ‘property ladder’ (never mind move up it). They could ‘start out’ somewhere else, but the prices in cities and towns within commuting distance of where they work are similar to here – how far ‘out’ do they have to go (and at what cost)?
The ‘prestige’ of living in a ‘million dollar neighbourhood’ is kind of nice and I’m hopeful that there will be a qualified buyer out there in four or five years who wants my little piece of paradise at whatever the going price is at that time (when my husband and I retire ‘for good’ and move somewhere more rural). But I also hope that the housing bubble will ease off in the not-too-distant future (not necessarily burst, but come down to a reasonable level) so that the next generation can afford a home they can live and love in when they reach … the other side of 55.