Toronto Home Owner - Should I Sell and Rent?

[Fortuna]

Situation:  Living in Mississauga, own my house and plan to live here for the next 7 yrs till my wife can retire from her job at the local school board. Then we want to move to the Niagara region and hope to be able to buy something much cheaper then and take out some equity to boost retirement.

Question:  The Canadian housing market appears to be at a peak very similar to 1989 when prices dropped by about 40-50% over the next 7 years.

http://www.torontohomes-for-sale.com/account/461083ac0e597a15/pages/2578_6.gif 

So while this may be real estate market timing I am thinking should we sell invest the proceeds and rent till we relocate or there is a significant drop and we buy back in?

Considerations: We like to have some outdoor space so a yard or patio that does not have to be big but needs to be peaceful and private (that is what we have now) would be a strong desire.  And we would not live in a condo or high rise so finding that kind of rental would be a challenge.

Anyone else who has considered selling and renting either permanently or until prices correct?  Anyone who has taken that step?

[Ziggurat]

We're on the other side of Toronto but similar situation, probably more like a few years until moving away.  It has been tempting, and in fact we were thinking of downsizing to lock in some equity gains, but are not so keen any more, with the transaction costs not being worth it.

I'm not so convinced that this run up in prices is going to pull back very much if at all.  From the graph you linked, the 1989 peak you mention was a doubling in average price over about 4 years.  The run-up in the more recent part of the curve is not that dramatic.  And I think the primary demographics driving prices will remain in place.  A recent news story noted that boomers are mostly not downsizing, but are in fact upsizing.  Meanwhile their kids are buying into the market as well, and they value living in the cities close to everything.  And the "inevitable" interest rate hikes are always a year away for many many years now, with the economy showing little signs of dramatic recovery.

Just some thoughts... obviously no one can predict what will happen.  If a 30% pull-back will completely wreck your plans, then it sounds like selling would guarantee your success, while staying in does leave some risk.

[Fortuna]

Thanks Ziggurat - personally I cannot see prices not correcting somewhat.  Housing affordability is just too stretched and many young people cannot afford homes and are scared of the condo market.  How big would the correction be is the big question.  When I think if staying put I tell myself any correction will also happen in other markets I would move to so my buying power would be intact.  So 30% drop would not wreck our plans but may reduce the equity we get out of moving.

Another interesting wrinkle is that Niagara is a popular retirement destination and in 7 yrs prices there could be higher with less of a gap from the GTA than now.

[Ziggurat]

Another interesting wrinkle is that Niagara is a popular retirement destination and in 7 yrs prices there could be higher with less of a gap from the GTA than now.

That's a great point ... we have thought about retiring to Niagara region also - better climate, close access to Toronto, and quick access to the U.S. as well.  No doubt it will become even more popular with time.

[Carless]

Have you looked at Garth Turner's website?  He is convinced that we're headed for a housing crash and backs it up with statistics.  OTOH he agrees this won't affect all areas, for example he thinks the 416 will be stable.  Interesting reading and he's quite willing to be blunt and rude.  http://www.greaterfool.ca/

[Ziggurat]

Re-opening an old topic.  This thread just popped into my mind, and I'm curious to know what happened to Fortuna and where people think we are now.

We did end up downsizing not long after my last post.  Pulled a classic MMM move -- smaller house, cheaper, closer to work.  Killed the mortgage with money left over to invest.  And, best of all, we are much happier in the new house.  It just fits our minimalist lifestyle better, the layout really works well, and its closer to everything.

And @carless, I've been following Garth's blog for some time now, not because I believe he is right, but because I like to challenge myself with a contrarian view to mine.  He's probably about to be right (after years of doomsaying on this topic), although it remains to be seen whether there is a dramatic crash.  I think we'll have a gentler pull-back than he is saying, and I still think the demographics is going to drive demand for a number of years yet, so I expect house prices will recover most of the loss within a few years.