The Economic Dangers of Real Estate Bubbles

 

200 Posts on My Search for a Home

Apparently I just surpassed 200 posts on My Search for a Home.

What started as blog for fun and later morphed into a real estate website which makes me some extra income just keeps growing thanks to people wanting to advertise their real estate websites, home insurance, etc. (This is a habit I have... Everything I touch turns into money somehow.)

It also led to me creating a sister blog ProjectGridless.ca which is all about off grid real estate, solar panels and wind turbines, etc.

People looking for advertising on either website should email me via charlesmoffat@charlesmoffat.com.

I am curious what this website will look like in 9 years (2030) as I should own a home by then. I suspect it might include more topics related home insurance, home repairs, gardening, etc. So I have a feeling the website will morph over time.

If we later sell that house and get a different house that could lead to another series of blog posts about that whole process too.

Toronto Home Rentals - Finding what you want is Difficult

So my wife and I have been very happy living in Leaside for the past many years, but we're now looking for a new place for us, our son, and my mother-in-law.

There is a big catch however. We ideally want to rent a house that has a bedroom on the first floor so that my mother-in-law won't have to climb the stairs.

This also means we need a full bathroom on the first floor so that my mother-in-law doesn't need to climb the stairs to reach the bathroom.

However finding a house that is for rent... In the area we are looking for... With a minimum of 3 bedrooms... With at least 1 bedroom + 1 full bathroom on the ground floor... With room for 2 cars in the driveway or garage...

Well, it is proving to be difficult.

Plus coupled with the fact that landlords are sometimes, unfortunately, racist. We have encountered this particular problem twice already where landlords are coming up with excuses not to rent to us. Not because of money reasons, my wife is a lawyer, I am gainfully employed as a personal trainer whenever COVID is not interfering with my work, and my mother-in-law is retired and has a hefty pension plan from the Hospitals of Ontario Pension Plan (HOOPP). So we definitely have the money, but landlords are a sketchy bunch when it comes to renting to African-Canadians.

As a Caucasian I admit this is my first time encountering this problem. I am admittedly used to just asking to rent a place and people just automatically saying "Yes, sure you can rent it!" Most of the places I have rented in the past didn't even ask for a credit check. (Yes, you read that correctly. White people are not used to having credit checks when we ask to rent an apartment or a house. People just usually take us on our word that we can afford the place. I fully recognize that I have been benefiting from white privilege for decades.)

There also seems to be a lack of availability in the East York region of Toronto that we are looking in, so we don't really have a lot of options.

We can...

1. Look elsewhere. We might have more luck in a different neighbourhood.
   
2. Wait and keep looking for new places to come on the market in the desired neighbourhood.
3. Do both 1 and 2.
   

Really those are our only options right now.

I have to assume that somewhere out there is a landlord who isn't racist with a house that fits our needs.

The parking issue alone is annoying. Not every home even comes with a lane way or garage and some streets just use "on street parking", which unfortunately gets into legalities of where homeowners can actually park their cars without fear of being towed.

The other big issue happening right now is...

COVID.

Which makes viewing homes a little bit trickier, but COVID has also thrown a wrench into the works with respect to house prices and also home rental prices.

What we have noticed is that the prices for renting a house keep coming down, which should really make landlords eager to find a renter - regardless of the colour of their skin! But apparently racist landlords would rather earn less money than rent to someone who is African-Canadian or to an interracial couple.

What were the biggest real estate problems during 2020?

In 2020, the real estate industry faced several significant challenges due to various factors, including the global COVID-19 pandemic. Here are some of the biggest real estate problems that emerged during that year:

1. Pandemic-Induced Market Uncertainty: The outbreak of COVID-19 created widespread uncertainty in the real estate market. Stay-at-home orders, lockdowns, and social distancing measures disrupted property transactions, construction projects, and property valuations. Many buyers and sellers put their plans on hold, leading to a slowdown in activity and market uncertainty.

2. Decreased Buyer Demand: With the economic downturn and rising unemployment rates caused by the pandemic, buyer demand significantly decreased. Job insecurity and financial constraints made potential homebuyers hesitant to make significant financial commitments. This decline in demand led to longer listing times and price reductions in many markets.

3. Supply Constraints: The pandemic also disrupted the supply side of the real estate market. Construction projects faced delays due to shutdowns, labor shortages, and supply chain disruptions. This resulted in a shortage of available housing inventory in many areas, further limiting buyer options.

4. Mortgage Challenges: Lenders tightened their lending standards as a response to economic uncertainty. Borrowers faced more stringent requirements and increased scrutiny during the mortgage application process. Additionally, some lenders suspended or reduced the availability of certain loan products, making it more difficult for buyers to secure financing.

5. Rent and Mortgage Payment Delinquencies: As the pandemic caused financial hardships for many individuals and businesses, some tenants and homeowners struggled to meet their rental and mortgage obligations. Rent and mortgage payment delinquencies increased, putting pressure on landlords and lenders to find solutions and navigate the complex landscape of eviction moratoriums and forbearance programs.

6. Shifts in Housing Preferences: The pandemic prompted changes in housing preferences as people sought larger living spaces, home offices, and outdoor areas. Urban areas experienced a temporary exodus, with a preference for suburban or rural locations. This shift in demand patterns and preferences posed challenges for sellers and developers who had to adapt to the changing market dynamics.

7. Eviction and Foreclosure Concerns: With the economic fallout from the pandemic, eviction and foreclosure concerns became prominent. Governments implemented various eviction moratoriums and foreclosure moratoriums to protect vulnerable tenants and homeowners facing financial hardship. Balancing the need for protection with the financial impact on landlords and lenders became a significant challenge.

8. Virtual Real Estate Transactions: To adapt to social distancing measures, real estate professionals had to embrace virtual tools and technologies for property showings, home inspections, and closings. The transition to virtual transactions presented logistical and technical challenges and required adjustments to traditional processes.

9. Commercial Real Estate Struggles: The pandemic had a substantial impact on the commercial real estate sector. Businesses faced closures, downsizing, and remote work arrangements, leading to increased vacancies in office spaces, retail properties, and hospitality establishments. Landlords and investors had to navigate declining rental income and property valuations.

10. Shifts in Short-Term Rental Market: The short-term rental market, such as Airbnb and vacation rentals, faced significant disruptions due to travel restrictions and changing consumer behavior. Many property owners experienced a decline in bookings and revenue, leading to financial difficulties.

Overall, the real estate industry encountered numerous challenges in 2020, primarily due to the unprecedented circumstances brought about by the COVID-19 pandemic. However, the industry demonstrated resilience and adaptability as it sought innovative solutions to navigate these problems and find new ways to conduct business in a rapidly changing environment.

How did the pandemic effect Toronto's real estate market during the first half of 2020?

The COVID-19 pandemic had a notable impact on Toronto's real estate market during the first half of 2020. Here are some key effects:

1. Temporary Slowdown: The market experienced a temporary slowdown as the pandemic and related restrictions disrupted normal real estate activities. Stay-at-home orders and social distancing measures resulted in a decline in property showings, open houses, and in-person transactions.

2. Decreased Sales Activity: The number of home sales in Toronto decreased significantly during the first half of 2020 compared to the same period in previous years. Buyers and sellers adopted a cautious approach due to economic uncertainty and concerns about the impact of the pandemic on the market.

3. Decline in New Listings: The number of new listings entering the market also decreased. Potential sellers, concerned about the uncertainties and financial impact of the pandemic, held off on listing their properties. This led to a decrease in available inventory, contributing to a more competitive market.

4. Price Stability: Despite the slowdown in sales activity, the average home prices in Toronto remained relatively stable during the first half of 2020. While there were fluctuations in specific segments of the market, the overall prices did not experience significant declines.

5. Shift in Housing Preferences: The pandemic prompted shifts in housing preferences as people sought more space, home offices, and outdoor areas. Suburban areas and properties with larger square footage gained popularity, while there was a temporary decline in demand for downtown condominiums.

6. Increased Use of Virtual Tools: To adapt to social distancing measures, real estate professionals and consumers turned to virtual tools and technologies for property showings, virtual tours, and digital transactions. Virtual tours and online marketing became crucial in showcasing properties and facilitating remote buying decisions.

7. Mortgage Payment Deferrals: The pandemic led to financial challenges for some homeowners, resulting in mortgage payment deferrals offered by lenders. This measure provided temporary relief to homeowners facing financial hardship and helped mitigate the risk of forced sales or foreclosures.

8. Government Measures: The Canadian government and local authorities implemented various measures to support the real estate market and mitigate the impact of the pandemic. These measures included mortgage payment deferral programs, economic stimulus packages, and eviction moratoriums to protect vulnerable tenants.

9. Gradual Recovery: Towards the latter half of 2020, the Toronto real estate market started to recover as restrictions eased and economic activity resumed. Sales activity increased, and new listings gradually entered the market, leading to a more balanced market environment.

It's important to note that the effects of the pandemic on the real estate market were dynamic and varied across different segments and neighborhoods within Toronto. The situation continued to evolve as the year progressed, and the market demonstrated resilience and adaptability in navigating these challenges.