I am beginning to understand the nature of your dilemma. It would be really nice to find a place between 800-900sq feet in the city for the price that you are paying now. Unfortunately it is very hard to find such a place in Toronto right now. Where I live in Leslieville the average price for a small two story home (about 1000sq feet) is $460k while a semi detached two storey(1200sq feet) unit with its interior renovated was $550k. If you want to know how ridiculous the RE market has become in this city and the effect that it has on our street, there is a family that bought a 2500+sq foot home for 300-350k a few years ago and took out a $300k HELOC to completely renovate its interior (I think they put some cash down to reduce the size of the loan!). Construction has gone on for 6 months and won’t be completed till early February 2010. A neighbor of mine told me that in order for the family to recover its investment, the house would have to sell between $850k-$1,000,000 dollars. This is happening on a street where the median price of a home in 1991 was a mere $182-200k!!

Last year I checked the Toronto Real Estate Board (TREB) Multiple Listing Service for the average price of homes in Metro Toronto. It seems that the most affordable homes in the city were in the north-west quadrant near Brampton at $255k. In fact all the homes in the outer suburbs of Metro bordering Vaughan, Richmond Hill and Markham were approaching $300k. It’s almost safe to say that these homes have appreciated between $50-75k in value in 2009. If you work in Downtown Toronto then buying a home in this part of the city is definitely a no go decision! If you are looking for an area of the city that is at least 35min from downtown then Etobicoke is a “possible” option. I have to agree with the comment that one blogger posted to you over the last two days. You might have to consider a fixer-upper in the $300-350k range that is close to were you work. Try not to pay too much for that place and if you are going to stay there for longer than 10 years, spend between $25-50k to renovate the place. We put about $25k to fix and renovate our house over a 7 year period.

If you are looking for a place for $350k in Toronto it will be hard, but not impossible to find. It’s just that you will have to find a good real estate agent that is very determined to undertake the legwork to give you a number of good properties to see. I cannot say as to which part of the city that you would like to live in, but you do have choices. Last night my brother told me that the President of ING Canada was on CFRB1010 yesterday and wanted to warn Canadians that he was noticing troubling signs in the RE market that he had seen in California in 2007-08. He said that people are taking on too much debt when buying real estate. He said that first time home buyers that purchase a home (at 95% debt) can get low rates for the next 5years. However rates are set to increase in the middle of next year and will reach 8-10% within 5 years. When people have to renegotiate their mortgages their payments could increase 40-50%. That means that people will be scrambling to keep up with the payments when incomes as a whole are stagnant. If you read my previous post I have already outlined a simplified version of the subprime mortgage crisis. The President of ING feels that when the housing bubble burst people who bought houses from 2007-2010 will be underwater(for homes between 300-550k) and if wage cuts and unemployment gets worse people will lose their homes because the mortgage that they carry will significantly eat into their incomes and then they will struggle to keep up with the payments. If they lose their jobs or become sick, they fall behind in their house payments, face warnings from the banks, then foreclosure and eventually bankruptcy. TD Bank economists are warning Canadians of slow growth of 2% from 2009-2019 and that the RE market faces a slow recovery. This means that all of us have to save more money and cut the cost of our bills and debt .Real estate comprises 20% of Canada’s $1.1 trillion dollar economy. If the housing bubble burst’s it could also affect commercial properties if service business cut back, close or go out of business resulting in hundreds of billions in losses.

From the last post you wrote to me, it’s clear that your wife is ignoring the financial analysis that was done. She is basing her decisions on emotion and peer pressure not on reason or hard facts. You have to let her know in a subtle way that you are trying to save money and create a sound financial plan for the future. It will require hard work and sacrifice. Taking on too much debt to buy a house is a recipe for disaster and must be avoided. If you want her to understand the impact of such a decision go onto the internet to the PBS Frontline website and watch the 1 hour show “Close to Home”. It is the story of a woman who owns a hair salon in New York’s well to do Upper East Side and how the recession is affecting the lives of her patrons who pay $40 for a hair cut. Some of the personal stories are truly heartbreaking and even when some people did things right the recession brought them to the brink of ruin especially for those who bought property in 2006. Look, she does not have to believe the facts you give her about the fragile state of the economy in this recession, but if she watches these personal stories of the financial crisis on PBS.com or Youtube.com it has a chance of changing her view.

To answer your question. We live in a small 1 bedroom appt that is probably 580 sq feet and pay 1550 per month. K granted the building is brand new in a high demand area. The same unit sells on mls for 320 k. I can’t imagine the stupidity of anyone paying that much to buy so little space. My buddy just bought in the distillery district for nearly 600 per sq foot. Wowee!

I did not know that you were an accountant.My sincere apologies if my post seemed blunt or hard nosed. I am glad that you did a cash flow analysis. Did it shed some light on your ability to afford a house over a 10 year period especially if interest rates increase between 8-10% after 5 years. What is the average rent in the area that you live in?. What is the average prices of homes in your neighborhood?. Is your wife coming around to your point of view?

If you think the Americans have gone off the deep end, this video on “China’s empty city” is a must see! Central planning at it’s finest.

“Nobody has really ever lost money investing in real estate in China…”

http://www.zerohedge.com/article/other-side-chinas-8-gdp-growth-ghost-cities

You can never time your entrance into the market. The first purpose of owning a home is for comfort. Look for a fixer upper that both of you can have a good time renovating together. If you’ve been renting for a while you must have saved something???

Your wife is right in some respect… A good renter would have saved money and that being the case at some point would have enough money to buy a place even with today’s prices. Do you really want to fork out 30% of your income while being retired towards rent or own and have 30% more money towards your last days off.

My solution: Sounds like the insurance companies
are donning their robber baron masks. We once ran into a situation with our boat building business that insurance companies wouldn’t sell us product liability insurance. We got around it by telling our customers that our boats were NOT insured for manufacturing defects. Our clientel trusted our reputation for building quality boats to the extent that they bought out product knowing they couldn’t sue us on the off-chance they weren’t perfect. Five years down the road the insurance companies hit us again with high premiums for fire insurance on our cement block building which they upped to outrageous sums. Then we had to tell customers they had to provide their own insurance on boats under construction or in the process of being repaired. The last five years we were in business, we carried NO product liability NOR fire insurance on the building–thereby saving more than $500/month in ‘new’ premiums.

Since we don’t have a mortgage on our house, we’ll resort to not carrying insurance, thereby we won’t get angry at their outrageous increased premiums! My advice…if you can manage it… tell your insurance company to get lost! You can’t image the freedom you give yourself by not being indebted and making oneself subject to being scared. There are lots of benefits to owning a house without owing a dime on it!

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To the gentleman having a marital dispute with his wife about buying/not buying a house: I’ve been married one year short of fifty years and never at any time during that period had major differences of opinion with my hubby about spending “large sums of our combined incomes.” There surely has to be something the two of you enjoy doing together which I strongly suggest you engage in that activity and refuse to fight about ‘major’ decisions. If you can’t come to agreement, then dissolve the marriage because the two of you obviously won’t be together in five years time. People who have successful marriages don’t waste their time fighting each other–they formed a workable team relationships during courtship that was enhanced by the marriage ceremony.

Thanks again for the advice guys. Let’s continue this on the newest blog update.

Anyways, we should all go to Dr Phils blog……

Good luck Typhoon!